Apple (AAPL) is reportedly holding internal discussions about acquiring artificial intelligence (AI) startup Perplexity AI, or at least forming a long-term partnership with the company. The move comes as the iPhone maker seeks to bolster its AI capabilities. It is worth noting that Apple failed to impress investors and analysts at this year’s annual Worldwide Developers Conference (WWDC) event, as it launched limited new AI features and delayed the roll out of its revamped Siri.
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The news was first reported by Bloomberg on Friday,citing people familiar with the matter. The discussions are still in the early stages and a deal may not materialize. Interestingly, Apple’s move comes shortly after news broke that rival Meta Platforms (META) had failed in its attempt to acquire Perplexity AI. Meanwhile, Perplexity AI stated that it has no knowledge of any such “M&A discussions.”
Why Does Apple Want to buy Perplexity AI?
According to the report, Apple’s top executives, including Adrian Perica, Apple’s head of mergers and acquisitions, and Eddy Cue, chief of streaming services and iCloud, are leading the private talks. The acquisition would help Apple develop its own AI-enabled search engine. Perplexity recently reported that its search queries grew 20% month-over-month to reach 780 million queries, marking a significant shift toward AI-driven searches. Traditional search engines are increasingly facing stiff competition from AI-enabled models such as OpenAI’s ChatGPT and Perplexity AI.
Additionally, Apple currently lags behind its rivals in the AI race, offering limited Apple Intelligence features compared to competitors. The company may try to partner with Perplexity if a buyout deal fails, which would allow Apple to integrate Perplexity’s AI models into Safari and Siri. Moreover, Apple would gain access to Perplexity’s AI talent and establish close ties with a renowned brand. Perplexity was valued at $14 billion in its most recent funding round, led by venture capital firm Accel. If the deal goes through, it would be Apple’s largest acquisition to date.
Apple-Google Partnership Is in Jeopardy
Apple currently has a deal with Alphabet’s (GOOGL) Google Search, which generates about $20 billion in annual revenues for the company. Under this agreement, Google Search is set as the default search engine on Apple’s Safari browser. However, the future of this deal hangs in the balance, as Google lost a landmark Search dominance lawsuit against the U.S. Justice Department and now faces the possibility of being required to sell its Search business.
The news also impacted GOOGL stock, which closed down 3.9% on Friday, June 20. Google earns billions of dollars in advertising revenues from its search browser. The report also noted that any direct talks of a deal between Apple and Perplexity would likely occur only after the ruling in Google’s antitrust trial, since Apple would then have greater clarity regarding its partnership with Google.
Is AAPL a Buy Right Now?
On TipRanks, AAPL stock has a Moderate Buy consensus rating based on 13 Buys, eight Holds, and two Sell ratings. Also, the average Apple price target of $230.77 implies 14.8% upside potential from current levels. Year-to-date, AAPL stock has lost 19.5%.
