OpenAI acquires Jony Ive's hardware startup IO for $6.5B to build AI-first devices

Summary

OpenAI is acquiring IO, the secretive AI hardware startup co-founded by Jony Ive and former Apple designers Scott Cannon, Evans Hankey, and Tang Tan, in a nearly all-stock deal valued at $6.5 billion. This is OpenAI's largest acquisition ever. The transaction is expected to close in summer 2025 pending regulatory approval. The deal represents roughly 2% of OpenAI's equity at its current $330 billion valuation. OpenAI had already purchased a 23% stake in IO in Q4 2024. Love From, Ive's design consultancy, is not being acquired but will continue working on IO projects inside OpenAI.

OpenAI lacks a native hardware distribution channel. Google dominates Android with extensive AI integrations. Apple controls iOS but lags in AI capabilities and relies partly on OpenAI's ChatGPT to fill gaps. Facebook owns significant consumer device real estate through Ray-Ban glasses and Quest VR headsets. As AI models improve and new interaction paradigms emerge, that gap becomes acute. Building a hardware unit under Ive solves the problem directly.

Ive left Apple in 2019 after designing the iPhone, iPad, iPod, and Apple Watch. In a joint interview with CEO Sam Altman, he described the move as inevitable: "I have a growing sense that everything I've learned over the last 30 years has led me to this place and to this moment." Altman responded that Jobs would be "damn proud" of Ive's move and suggested the new devices could represent "a product at the level of quality that has never happened before in consumer hardware."

Neither executive disclosed the form factor. Altman teased the possibility of "a rectangle with a screen" before pushing back on the assumption. The team of 55 hardware engineers, software developers, and manufacturing experts will develop a "family of devices," not a single product. Ive and Altman have been exploring ideas for roughly two years. The first device is slated for 2026, around the time AGI timelines have become culturally significant in venture and tech circles.

Altman emphasized that the smartphone will not disappear, drawing a parallel to how laptops survived the mobile revolution. He also suggested the current paradigm is incomplete: "We are obviously still in the terminal phase of AI interactions. We have not yet figured out what the equivalent of the graphical user interface is going to be, but we will." Ive added that people sense unease with current technology and hunger for something new. Apple has exhausted most screen-size possibilities from watches to the Vision Pro.

Humane and Rabbit R1 attempted AI-first hardware but stumbled on product execution. Meta's Ray-Ban glasses and Nreal's AR displays show viable form factors gaining traction. None of those teams combined Ive's industrial design pedigree with frontier AI infrastructure. Altman's position across the stack—models, compute, now devices—creates optionality across the value chain.

Large companies have failed at hardware. Facebook's phone initiative and numerous Alexa spin-offs burned through billions. If the new device requires sound-based interfaces, adoption suffers. Nikita Bier noted that onboarding flows requiring audio face a 60% tax on growth because most app discovery happens in bed or on the toilet. Form factor matters more than novelty. Users will adopt additive devices like smartglasses and watches far more easily than replacements for phones or laptops they've used for years.

The $6.5 billion price tag is defensible by the math of executive equity. Securing Ive as head of design and product probably costs 1-2% of a $330 billion company on its own. The real question is whether IO has already built something that works. Altman said in the video that he's "blown away" by an early prototype. The 2026 launch timeline suggests meaningful progress, though it also leaves little margin for iteration if initial user response is lukewarm.