Apple talking to AI startup Perplexity, claims report and why it pulled down Google shares
Apple Inc. is exploring a potential acquisition of
AI startup Perplexity
AI to bolster its artificial intelligence capabilities, according to Bloomberg, citing sources familiar with the matter. The discussions, led by Adrian Perica, Apple's head of mergers and acquisitions, alongside services chief Eddy Cue and key AI decision-makers, are in early stages and may not result in a formal offer, the sources said, speaking anonymously due to the private nature of the talks.
Apple buying Perplexity will be the company's largest-acquisition so far
A deal for Perplexity, recently valued at $14 billion, would mark Apple's largest acquisition ever, surpassing its $3 billion purchase of Beats in 2014. The move could help Apple develop an AI-powered search engine, addressing concerns over its $20 billion annual deal with Google, which faces scrutiny from US antitrust regulators. No discussions have occurred with Perplexity's management, and the startup stated it has 'no knowledge of any current or future M&A discussions.' Apple declined to comment.
Why Apple-Perplexity news pulled down Google stock
Google shares reversed gains and fell nearly 1% in late trading after Bloomberg reported on Apple's Perplexity discussions. The news sparked investor concerns about Google's long-standing dominance in the search market, particularly its lucrative $20 billion annual deal to remain the default search engine on Apple's Safari browser. Apple's senior vice president, Eddy Cue, revealed during Google's antitrust trial that Safari search volumes declined for the first time in April, attributing this to growing user preference for AI-driven search alternatives like Perplexity and ChatGPT. If Apple acquires Perplexity, valued at $14 billion, it could reduce reliance on Google, threatening the latter's search advertising revenue, which accounted for $162 billion of Alphabet's $283 billion in 2022 revenue. The potential loss of this partnership, combined with the U.S. Department of Justice's push to curb Google's search monopoly, heightened market fears. Additionally, Perplexity's 20% month-over-month query growth signals a shift toward AI search, challenging Google's traditional model despite its own AI efforts like Gemini.
Why Apple may be planning to buy Perplexity
Perplexity's real-time, web-based question-answering service could enhance Apple's efforts to compete in generative AI, where it trails rivals. Apple's recent AI offerings, unveiled at its Worldwide Developers Conference, include live translation and a partnership with OpenAI for ChatGPT-based image generation, but a revamped Siri has been delayed until next spring. Acquiring Perplexity could provide Apple with AI talent, a recognized brand, and a consumer product to strengthen its position.
Alternatively, Apple has considered partnering with Perplexity, potentially integrating its technology into Safari and Siri. The companies have met multiple times, with Apple's AI team evaluating Perplexity's technology, signaling interest in a closer relationship.
Meta and Perplexity talks failed
The news follows Meta Platforms Inc.'s failed attempt to acquire Perplexity earlier this year, after which Meta purchased a 49% stake in Scale AI for $14.3 billion. Apple and Meta are also competing for talent, with both companies vying to hire Daniel Gross, co-founder of Safe Superintelligence Inc. and a former Apple acquisition via his startup Cue in 2013. Google shares dipped nearly 1% in late trading after the report.
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