(Bloomberg) -- OpenAI will acquire the AI device startup co-founded by Apple Inc. veteran Jony Ive in a nearly $6.5 billion all-stock deal, joining forces with the legendary designer to make a push into hardware.

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The purchase — the largest in OpenAI’s history — will provide the company with a dedicated unit for developing AI-powered devices. Acquiring the secretive startup, named io, also will secure the services of Ive and other former Apple designers who were behind iconic products such as the iPhone.

“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,” Ive said in a joint interview with OpenAI Chief Executive Officer Sam Altman. “It’s a relationship and a way of working together that I think is going to yield products and products and products.”

For the British-born designer, the move marks a high-profile return to a consumer technology industry he helped pioneer. Working for years alongside Steve Jobs, he crafted the look and feel of the modern smartphone, in addition to the iPod, MacBook, iPad and Apple Watch. He left Apple in 2019.

When Ive departed Apple, CEO Tim Cook pitched the idea that the two parties would remain collaborators. But they never released a product together after Ive’s exit. And now the designer is embarking on a new collaboration with Altman, who he called a “rare visionary.”

Ive was once described by Jobs as his “spiritual partner,” and his new stint designing rival technology products could be seen as a bad omen for Apple — a company already struggling to compete in AI. In the interview, Altman said Jobs would be “damn proud” of Ive’s latest move.

OpenAI is going to create a product at a level of quality that “has never happened before in consumer hardware,” Altman said. “AI is such a big leap forward in terms of what people can do that it needs a new kind of computing form factor to get the maximum potential out of it,” he said.

Apple shares dropped as much as 2.3% in New York on Wednesday. They had been down 17% this year through Tuesday’s close.

As part of the deal, OpenAI is paying $5 billion in equity for io. The balance of the nearly $6.5 billion stems from a partnership reached in the fourth quarter of last year that involved OpenAI acquiring a 23% stake in io.

Separately, OpenAI’s startup fund also invested in Ive’s company at that time. Billionaire philanthropist Laurene Powell Jobs is an io backer as well, through her firm the Emerson Collective. Other investors include Sutter Hill Ventures, Thrive Capital, Maverick Ventures and SV Angel. Altman doesn’t have equity in io, OpenAI said.

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The deal is expected to be completed this summer, pending regulatory approvals. The takeover of io will provide OpenAI with about 55 hardware engineers, software developers and manufacturing experts — a team that will build what Ive and Altman expect to be a family of devices. The two executives had already been exploring some early ideas for about two years, they said.

The pair expects their first device to be a truly novel type of product. “People have an appetite for something new, which is a reflection on a sort of an unease with where we currently are,” Ive said, referring to products available today. Ive and Altman’s first devices are slated to debut in 2026.

When he left Apple six years ago, Ive started the firm LoveFrom, a collective of designers and engineers. The staff includes veterans of Apple’s hardware and software departments, as well as friends of Ive and other collaborators.

He then co-founded io last year with Apple alumni Scott Cannon, Evans Hankey and Tang Tan. Hankey was Ive’s successor at Apple and remained at the company until 2023, while Tan led iPhone and Apple Watch product design until 2024. Cannon worked at Apple before co-creating the once-popular email app Mailbox, which was acquired by Dropbox Inc.

At io, the group set out to develop, engineer and manufacturer a collection of products for an era of artificial general intelligence — the point when technology achieves humanlike cognitive abilities. The team will now continue that mission at OpenAI, becoming a threat to the very devices that the designers helped create.

That adds to the challenges of Apple, which has fallen behind its Silicon Valley peers in artificial intelligence. The company’s AI platform, released last year, lacks the capabilities of rival systems and relies in part on OpenAI’s ChatGPT chatbot to fill in the gaps.

Still, Ive and Altman don’t see the iPhone disappearing anytime soon. “In the same way that the smartphone didn’t make the laptop go away, I don’t think our first thing is going to make the smartphone go away,” Altman said. “It is a totally new kind of thing.”

“The phone, as it currently is, is a remarkable general-purpose device,” Ive said, adding that people will connect with AI in “very new ways.”

OpenAI, founded a decade ago as a research organization, became a driving force in AI with the release of ChatGPT in 2022. The company’s valuation has swelled to $300 billion, and it’s looking to expand its reach through acquisitions. OpenAI is working on other transactions, such as a $3 billion deal for AI coding software company Windsurf.

OpenAI also shook up its management ranks this month, with the San Francisco-based company appointing Instacart chief Fidji Simo as the CEO of applications. She reports directly to Altman, allowing him to focus on the broader strategy.

Hankey, who will become an OpenAI employee along with Tan and Cannon, said that ChatGPT’s debut prompted a realization that hardware technology would have to change. “A number of us looked at each other and said, ‘This is probably the most incredible technology of our career,’” she said in an interview.

While Ive and LoveFrom will remain independent, they will take over design for all of OpenAI, including its software. Altman said his first conversations with Ive weren’t about hardware, but rather about how to improve the interface of ChatGPT.

“We are obviously still in the terminal phase of AI interactions,” said Altman, 40. “We have not yet figured out what the equivalent of the graphical user interface is going to be, but we will.”

LoveFrom has a number of former Apple designers who helped create the look of the Mac and iPhone operating systems, including Bas Ording, Mike Matas and Chris Wilson, Ive said. They could help redesign OpenAI’s app for a new generation of consumers.

LoveFrom will continue its existing relationships with customers like Ferrari NV and Airbnb Inc. but won’t take on major new clients. The new hardware team within OpenAI will be overseen by Peter Welinder, who will report to Altman as a product vice president.

Ive said ChatGPT was initially put on his radar by one of his twin sons, Charlie, and he immediately knew he had to meet Altman after using it. The new team at OpenAI will work at io’s existing workspace in Jackson Square, a neighborhood in San Francisco, and OpenAI’s current offices.

“I have felt that my most important and useful work is ahead,” Ive said, adding that he’s been “training” for this moment. He compares the experience to Apple in the late 1990s and early 2000s, before the iPod and iPhone. “I’m just really, really grateful we all found each other.”

Ive and Altman wouldn’t elaborate on what hardware products they are working on, but they will be entering a market in its infancy. Meta Platforms Inc., the owner of Facebook and Instagram, is perhaps the most notable maker of AI devices. It sells popular Ray-Ban smart glasses that use cameras and microphones to provide context about the surrounding environment.

There have been public failures as well, such as the Humane Ai Pin and the Rabbit r1 personal assistant device. “Those were very poor products,” said Ive, 58. “There has been an absence of new ways of thinking expressed in products.”

Tan, who was central to developing every version of the iPhone within Apple’s hardware engineering department, said the new team isn’t tied to a “legacy” and will have an opportunity to “rethink this space.” Still, actually delivering a product will take a while.

“It will be worth the wait,” Altman said. “It’s a crazy, ambitious thing to make.”

(Updates with more background on Ive. An earlier version implemented correction from companies that Maverick Ventures invested in io.)

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