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🤖 AI Toys Are Coming Whether Kids Want Them or Not

Plus: The Microsoft-OpenAI Alliance Is Falling Apart

June 19, 2025

Hello AI Enthusiast,

This week OpenAI is partnering with Mattel to put AI in kids' toys, while simultaneously battling Microsoft in what's becoming the messiest corporate breakup in tech. Meanwhile, they're also dropping new models. Let's break down what's really happening behind all the headlines.

The Big Picture 🔊

OpenAI Turns to Google as Microsoft Partnership Hits Turbulence

OpenAI and Microsoft are locked in tense negotiations over their partnership while OpenAI quietly diversifies by signing a cloud deal with Google - despite ChatGPT directly threatening Google's search business. The talks involve OpenAI's corporate restructuring, profit-sharing, and whether Microsoft gets access to newly acquired companies like Windsurf. Both moves show OpenAI trying to reduce its Microsoft dependence as these AI giants navigate being partners and competitors simultaneously.

Andrea Mattiello
Andrea MattielloCM and Board Lover

This feels like a messy breakup where OpenAI went from needing Microsoft's money to being the hot commodity everyone wants. Choosing Google over Amazon for cloud is weird - why team up with your AI competitor instead of a more neutral provider?

But honestly, most companies probably won't notice if Microsoft quietly swaps OpenAI for another AI model. People stick with their Microsoft tools regardless, and the models are getting similar enough that users might not care who's powering them behind the scenes.

OpenAI Teams Up with Mattel to Bring AI to Toys

OpenAI is partnering with Mattel to integrate AI into iconic toy brands like Barbie and Hot Wheels, creating new AI-powered experiences and products. Mattel will also use ChatGPT Enterprise across its business operations for product development and creative work. The deal represents OpenAI's push into enterprise partnerships beyond software, while Mattel aims to "reimagine new forms of play" with AI technology.

James Varnham
James VarnhamCEO and Rainmaker

This feels like AI for AI's sake. Kids don't need a Barbie that remembers their name - they've been happy with regular toys for decades.

We're speculating since details are scarce, but the privacy concerns are real. Always-listening devices in kids' bedrooms? The EU regulatory nightmare will be something to watch. Will these toys actually help with homework or just create more family anxiety? Sounds like slapping "AI-powered" on toys to charge double.

With AI racing into everything, understanding how to build systems that actually work becomes crucial. Rather than just watching these developments unfold, you could be learning to create AI solutions that solve real problems.

Our 13th AI Agent Bootcamp starts June 23rd. While the industry sorts out partnerships and pricing wars, get hands-on skills that matter.

OpenAI Releases o3-pro and Slashes o3 Pricing by 80%

OpenAI released o3-pro, an upgraded reasoning model now available to ChatGPT Pro users, replacing o1-pro. The bigger story is Sam Altman announcing an 80% price drop for the entire o3 family, making these powerful reasoning models much more accessible. O3-pro beats Google's Gemini 2.5 Pro and Anthropic's Claude 4 Opus on key benchmarks, though it's slower and has some current limitations like disabled temporary chats.

Gioele Mottarlini
Gioele MottarliniCOO and Image Addict

This feels like OpenAI playing catch-up after Google's Gemini 2.5 Pro release. Launch something new, make your old stuff cheaper - basic tech marketing.

The 80% price drop is massive though. But OpenAI now has too many confusing options - GPT-4o, GPT-4.1, o3, o3-mini, o3-pro. By slashing o3 prices so dramatically, they're basically saying their old flagship is now so far behind they can practically give it away. That's either confidence or clever psychology.

Bits and Bobs 🗞️

  • Google has made Gemini 2.5 Pro and Flash generally available and introduced Gemini 2.5 Flash-Lite in preview—its fastest, most cost-efficient model yet.

  • Mistral has introduced two AI models, Magistral Small and Magistral Medium, designed for enterprise use with a focus on multi-step logic and language support.

  • ByteDance, the company behind TikTok, claims that its newly launched AI video generation model, Seedance 1.0, excels at producing high-quality motion and sharp images.

  • On his blog, Sam Altman discusses the progress toward digital superintelligence, highlighting how AI advancements are boosting productivity and have the potential to reshape entire industries.

  • OpenAI's Codex now offers "Best-of-N" functionality, allowing it to generate multiple responses for a task at once, helping users quickly explore different solutions.

  • Disney and NBCUniversal have sued Midjourney over concerns that its AI-generated content uses their copyrighted material without permission.

  • Meta's investment in Scale AI is causing some concern among its clients, including Google, which had planned to pay Scale $200 million but is now in talks with competitors.

  • Mark Zuckerberg recently highlighted advancements in AI-driven virtual reality, emphasizing its potential for more immersive user experiences.

LOLgorithms 😂

Apparently nobody asked Barbie if she wanted to become a chatbot.

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Catch you next week! 👋