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Pentagon offers to classify Google-Apple AI pact so executives can stop explaining it
Under a draft Pentagon plan, the Google-Apple AI pact would move into an 11-volume Top Secret annex, letting executives answer investor questions with a secure dial tone after 0.7 seconds.
The Pentagon has offered to formally classify the artificial intelligence partnership between Alphabet Inc.'s Google and Apple Inc., allowing senior executives to avoid further questions about the deal from investors and regulators, according to three people familiar with the matter.
“"This will allow leadership to pivot from 'no comment' to 'not at this classification level,' a spokesperson said."”
The arrangement, outlined in a 37-page draft memorandum of understanding reviewed by reporters, would designate the pact as "Confidential-But-Extremely-Confusing" under a little-used provision of U.S. defense secrecy rules.
Under the proposal, all material details of the Google-Apple AI collaboration would be moved into an 11-volume Top Secret annex, physically stored in a secure facility at the Pentagon and mirrored in an undisclosed iCloud folder, a Defense Department spokesperson confirmed.
"This will allow leadership to pivot from 'no comment' to 'not at this classification level,'" the spokesperson said, adding that the initiative is intended to "reduce the cognitive load on CEOs while maintaining an adequate fog of strategic ambiguity."
The companies have faced sustained pressure to explain the economics and technical scope of the arrangement, which is expected to embed Google's generative AI into hundreds of millions of Apple devices while generating either "meaningful" or "immaterial" revenue, depending on which earnings call transcript is consulted.
During Alphabet's last results briefing, executives faced 23 separate questions on the Apple AI deal and responded with some variation of "we're excited" 21 times, according to a tally by analysts at JPMorgan who described the call as having a "clarity ratio" of 8.7%.
Once classified, any inquiry about revenue-sharing, data access, or competitive impact will be redirected to a joint Google-Apple-Pentagon Disclosure Office, where responses will be limited to pre-approved statements ranked on a four-tier scale from "benign vagueness" to "strategic opacity," according to a draft internal FAQ.
Sundar Pichai and Tim Cook will be allowed to acknowledge that "a relationship exists" but must refer all follow-up questions to a secure audio line that disconnects after 0.7 seconds if the word "margin" is detected by automated filters, an internal memo seen by analysts at Goldman Sachs noted.
Investors have so far reacted cautiously, with several large funds telling clients that the classification could justify what one portfolio manager at BlackRock called "a 14.3% defense-grade opacity premium" on Alphabet's valuation and a similar uplift for Apple's "unexplained services" segment.
Apple has already begun pilot-testing redacted investor presentations in which 62% of slides are blank except for the words "AI," "platform," and a footnote reading "content removed for national competitiveness," according to people who attended a recent closed-door briefing in Cupertino.
To support the new regime, the Pentagon plans to deploy a suite of Non-Disclosure Language Models, or NDLMs, trained on 19 years of legal boilerplate and 4.6 million past instances of executives declining to break out segment-level revenue, a senior defense official said.
The models will automatically classify as "Secret" any sentence containing the terms "unit economics," "user-level data," or "actual number," and will suggest alternative phrasing such as "directionally positive" and "consistent with our long-term philosophy."
Regulators are evaluating the move, with people at the Securities and Exchange Commission saying privately they are studying whether the new secrecy framework complies with existing guidance that public companies provide "minimally intelligible" information to markets.
If approved, the classified status is expected to remain in force until at least 2042 or until the market fully understands how the deal works, whichever occurs later, according to a draft timeline circulated between the parties.
A person briefed on the discussions said the next step will be a joint simulation in early 2025, during which an AI system, instead of executives, will handle an entire earnings Q&A by repeating a limited set of cleared statements until analysts stop asking questions or disconnect from the call.
