Apple's Potential Acquisition of Perplexity: A Game-Changer for Its AI Narrative?

TradingKey - As the tech-oriented Nasdaq 100 Index hits record highs, Apple’s stock has still declined by 20% year-to-date in 2025. Concerns over its lagging progress in AI and the negative impact of tariffs on iPhone sales have yet to fully dissipate. However, news of a potential acquisition of Perplexity has led Wall Street firms like Bank of America to re-express confidence in Apple's AI prospects.

According to a Bloomberg report on June 21, Apple executives are exploring the possibility of acquiring Perplexity AI, an AI startup known for its ability to answer questions using real-time information. The company was valued at $14 billion in its latest funding round in May.

The report suggests that Apple’s potential acquisition of Perplexity could be part of its strategy to cope with the possible loss of its search partnership with Google due to antitrust concerns. It would also likely be Apple’s largest acquisition to date.

As of writing (June 25), Apple’s share price had fallen by 20.01% year-to-date, while the Nasdaq 100 Index rose by 5.61% during the same period, setting a new record high following de-escalation of tensions in the Israel-Iran war.

Analysts noted that ongoing delays in integrating Siri with Apple Intelligence, as well as Wall Street’s perception of insufficient investment by Apple in data center development, have affected investor sentiment toward the future outlook of this top-tier innovator.

However, Apple’s reported interest in acquiring Perplexity may breathe new life into its AI narrative. TD Cowen pointed out that one way for Apple to catch up is through acquisitions or partnerships with AI companies.

Bank of America stated that partnering with Perplexity would positively impact the stock price of this AI laggard.

BofA analysts highlighted several potential benefits such a move could bring to Apple: direct and immediate access to AI capabilities to enhance Siri and search functionality without relying on third-party providers; access to AI talent; and opportunities to develop revenue streams from search-based advertising.

Nonetheless, BofA also warned of challenges ahead for Apple, including the integration of external technologies into Apple’s ecosystem, potential legal issues arising from Perplexity’s data collection practices, and uncertainty about consumer acceptance of Perplexity’s services.

According to TradingKey, the average target price for Apple among 50 analysts is $231.018, representing a 14.65% upside from the latest closing price.

Analyst Forecasts for Apple's Stock Price, Source: TradingKey

Additionally, as of Q1 2025, Apple remained the most popular stock among major star investors or institutions, with holdings 1.25 times greater than Microsoft, which ranked second, and 5.6 times greater than Tesla, which ranked fifth.

Top Holdings Among Star Investors, Source: TradingKey