Apple Considers Acquisition of Perplexity AI Amid Antitrust Challenges with Google

Apple Considers Acquisition of Perplexity AI Amid Antitrust Challenges with Google

Apple Inc. is reportedly in the early stages of discussions regarding the acquisition of Perplexity, a rapidly growing AI startup. This consideration comes as Apple faces mounting antitrust pressure concerning its longstanding partnership with Google, which has been a significant source of revenue for the company.

Background on the Potential Acquisition

Internal discussions at Apple involve key executives, including Adrian Perica, head of mergers and acquisitions, and Eddy Cue, head of services. Although no formal offer has been made and Perplexity's management has not been approached, the talks indicate a strategic shift for Apple in the evolving landscape of artificial intelligence and search technologies.

The impetus for this potential acquisition is largely driven by the regulatory challenges surrounding Apple's agreement with Google. The U.S. Department of Justice has initiated an antitrust lawsuit against Google, which could jeopardize Apple's lucrative deal that reportedly generates around $20 billion annually by making Google the default search engine on its Safari browser. If this arrangement is dismantled, Apple risks losing a significant revenue stream and must quickly adapt its search strategy.

Implications of the Acquisition

Eddy Cue has acknowledged a decline in search volumes on Safari, attributing this trend to the growing popularity of AI-driven search alternatives like ChatGPT and Perplexity. An acquisition of Perplexity would mark a significant departure from Apple's historical mergers and acquisitions strategy, which has typically focused on smaller startups for talent and technology rather than larger entities.

Founded in 2022, Perplexity has rapidly increased its valuation, recently closing a funding round that valued the company at approximately $14 billion. A deal at this valuation would surpass Apple's previous largest acquisition, the $3 billion purchase of Beats in 2014. Acquiring Perplexity would not only enhance Apple's capabilities in AI but also provide an established product that could be integrated into its existing services like Safari and Siri.

Competitive Landscape

Apple is not alone in its interest in Perplexity. Meta Platforms, the parent company of Facebook and Instagram, reportedly engaged in acquisition talks with the startup earlier this year, though those discussions did not result in a deal. Following this, Meta has intensified its focus on AI, investing heavily in related technologies.

Additionally, there are reports of a potential partnership between Perplexity and Samsung, which could further complicate Apple's position in the competitive AI landscape.

Conclusion

Apple's consideration of acquiring Perplexity AI represents a pivotal moment for the company as it navigates the challenges posed by regulatory scrutiny and evolving market dynamics. The potential loss of its Google search deal presents both a financial risk and an opportunity for Apple to redefine its role in the AI-driven search market, aiming to become a more active player rather than a passive distributor of search technology.