Apple Needs $14 Billion Perplexity Acquisition To Catch Up In AI Race

Apple is facing significant challenges in the AI race, according to analyst Dan Ives of Wedbush Securities. Ives believes that Apple's efforts in AI have reached a critical point, and the company needs to acquire the AI startup Perplexity to catch up with its competitors.

Ives argues that Apple's traditional approach of building superior products in-house is not sufficient in the current AI landscape. The company has been losing top AI talent to competitors like Meta, and its recent developments in AI have been lackluster.

In a recent note, Ives compared Apple's situation to being at a highway rest stop while the AI race speeds by at 100 miles an hour. He highlighted that Apple's advantage lies in its vast user base of iPhones and iOS devices, but this advantage is narrowing as competitors make significant strides in AI.

Ives believes that acquiring Perplexity, a San Francisco-based startup worth $14 billion, could be a game-changer for Apple. Perplexity has gained recognition for its AI capabilities, including citing links to articles and other information in its responses. The startup recently launched Comet, an AI-based web browser, further solidifying its position in the AI market.

However, the acquisition of Perplexity would come with privacy considerations for Apple. The company is known for its end-to-end encryption in products like iMessage and FaceTime, and would need to ensure that Perplexity's AI runs securely, either locally or on a secure cloud architecture.

Some analysts are skeptical about Apple's ability to successfully integrate a large acquisition like Perplexity. The company has a history of maintaining a pro-building ethos and has been cautious with acquisitions. Its largest acquisition to date was the $3 billion purchase of Beats electronics in 2014.

Despite these challenges, Ives remains optimistic about the potential of an Apple-Perplexity partnership. He believes that the combined forces of Apple's ecosystem and Perplexity's AI capabilities could rival ChatGPT and significantly enhance Siri, making it a more frequent exposure to AI for many users.

In summary, Apple is at a critical juncture in the AI race and needs to acquire Perplexity to catch up with its competitors. While there are challenges and considerations to be addressed, the potential benefits of such an acquisition could be significant for Apple's AI efforts.