I'd say the proof is on Apple to show that it's being done on-device or that all processing is done on iCloud servers.

You're saying that OpenAI is just going to hand over their full ChatGPT model for Apple to set up on their own servers for free?

But from the article itself:

the partnership could burn extra money for OpenAI, because it pays Microsoft to host ChatGPT's capabilities on its Azure cloud

I get it if they created a small version of their LLM to run locally, but I would expect Apple to pay a price even for that.

I think you may be confusing this ChatGPT integration with Apple's own LLM that they're working on... Again, from the linked article:

Still, Apple's choice of ChatGPT as Apple's first external AI integration has led to widespread misunderstanding, especially since Apple buried the lede about its own in-house LLM technology that powers its new "Apple Intelligence" platform.