Apple's AI Acquisition: Perplexity or Gemini Partnership?

Apple's AI capabilities may be bolstered through an acquisition, according to Dan Ives, citing Perplexity and the Gemini partnership as potential targets. He believes that AI is crucial for Apple's future growth and that the company cannot afford to miss out on it. Ives thinks that Apple, which has traditionally been cautious about acquisitions, will need to make a move to stay competitive in the tech industry.

Apple Inc. (NASDAQ:AAPL) is widely recognized as a leader in the tech industry, but its artificial intelligence (AI) capabilities have been a subject of scrutiny. Recent developments suggest that Apple is exploring strategic acquisitions and partnerships to bolster its AI capabilities, as highlighted by Dan Ives, a financial analyst.

On August 22, Apple began early discussions with Google to potentially integrate its Gemini AI into a revamped version of Siri. This move could mark a significant upgrade for Apple's voice assistant, positioning it to catch up in the generative AI race. Apple is conducting an internal "bake-off" to compare its own AI model, code-named Linwood, with external models, including Google's Gemini, code-named Glenwood [1]. The decision on whether to use an external partner or stick with Apple's in-house model is expected in the coming weeks.

Apple's software engineering chief, Craig Federighi, described the Siri project as a "second-generation" architecture, emphasizing an "end-to-end revamp" for advanced personalization features. Federighi's approach reflects a shift from Apple's traditionally closed system to a more open approach, allowing the use of open-source models from other companies [3].

Eddy Cue, Apple's Senior Vice President of Services, has been a strong advocate for acquisitions, particularly in the AI category. While previous attempts to acquire Tesla and Netflix were unsuccessful, Cue has successfully pushed for acquisitions like Beats and Shazam [2]. Today, Cue is reportedly the biggest champion of Apple acquiring an AI company, with Perplexity and Mistral being top contenders.

The acquisition of Shazam in 2018 for $400 million offers an insight into Apple's acquisition strategy. Apple calculated the price based on the advertising spend for Apple Music on Shazam, ensuring that it did not overpay for companies based on buzz alone [2].

Dan Ives believes that AI is crucial for Apple's future growth and that the company cannot afford to miss out on it. He suggests that Apple, which has traditionally been cautious about acquisitions, will need to make a move to stay competitive in the tech industry. Apple's current AI models are relatively underpowered compared to competitors, and the company is facing a talent exodus, making acquisitions a compelling option [3].

The decision to acquire or partner with external AI models could significantly impact Apple's AI capabilities and overall competitive position. While Apple's traditional build-first philosophy has served it well in hardware development, the rapid pace of AI innovation may necessitate a more flexible approach.

References:
[1] https://finance.yahoo.com/news/apple-aapl-explores-google-gemini-043308141.html
[2] https://9to5mac.com/2025/08/27/eddy-cue-pushed-for-apple-to-acquire-two-big-companies-but-tim-cook-said-no/
[3] https://apple.gadgethacks.com/news/apple-ai-crisis-build-vs-buy-strategy-could-reshape-future/