Perplexity strikes Microsoft AI cloud deal amid Amazon legal fight

Perplexity, an American AI-powered search engine company, has concluded a $750 million deal with Microsoft Corp., a leading American multinational technology company. Under this deal, the AI startup will use Microsoft’s Azure cloud service.

However, it is worth noting that this agreement was struck at a time when Perplexity was involved in a legal dispute with Amazon.com Inc., its long-standing cloud partner.

Despite this legal dispute, sources close to the situation, speaking on condition of anonymity, acknowledged that the three-year deal is a significant milestone for Perplexity, offering several key advantages. One major advantage is that the agreement will enable the AI-powered search engine firm to use AI models through Microsoft’s Foundry service, including those developed by OpenAI, Anthropic, and xAI.

Regarding the matter, a Perplexity representative commented, “We are thrilled to team up with Microsoft for access to advanced models from X, OpenAI, and Anthropic.”

Microsoft and Perplexity ink a major technology contract

Following the spokesperson’s remarks, several Perplexity investors raised concerns about the firm’s relationship with Amazon, sparking heated industry discussions. In an attempt to address this controversy, the representative argued that the AI startup will maintain its expenditure with Amazon Web Services, which has long been the firm’s preferred cloud provider, as part of the Microsoft deal.

“AWS continues to be Perplexity’s preferred cloud infrastructure provider, and we look forward to announcing further expansions of that partnership in the upcoming weeks,” while maintaining anonymity, the spokesperson said.

At this point, several reports have demonstrated heightened interest in the topic, demanding clarity from Microsoft and Amazon. However, when they contacted both firms for comment on the situation, they declined to respond.

In the meantime, reports highlighted that Perplexity has solidified its position as one of the top-tier, high-level firms but faces stiff competition from tech giants, including Alphabet Inc.’s Google and OpenAI, as it aims to revolutionize the online search experience. Another issue is that the AI startup’s funding total is lower than that of OpenAI and Anthropic, which have enabled them to secure several significant infrastructure deals. 

On the other hand, sources claimed that Perplexity-Microsoft’s recently finalized deal unveils a growing trend in which big firms frequently rent infrastructure from diverse cloud service providers to unlock exclusive features and reduce their reliance on any one provider.

Notably, this trend gained significant momentum with the rise of AI, as companies experiment with new tools and enter into agreements with both model developers and cloud service providers, which play a key role as hosts of the software.

While this practice continues in the industry, reports noted that Perplexity relied on AWS for the majority of its operations, using Amazon’s Bedrock service to integrate Anthropic models into its search engine. This finding was made public following a statement from Aravind Srinivas, the Chief Executive Officer of Perplexity, at AWS conferences. 

Perplexity-Amazon’s legal battle sparks heated debates in the tech industry 

In 2023, during a crucial event, Srinivas admitted that he had decided to fully commit to Amazon’s cloud services. In return, AWS identified Perplexity as one of its premier AI customers.

Nonetheless, recent reports have highlighted that the two tech giants are embroiled in a legal conflict. This legal battle began in November, when Amazon filed a complaint against the AI-powered search engine company to prevent it from granting users permission to shop and buy items specifically from Amazon’s online marketplace using its AI tools. 

Responding to this move, Perplexity retaliated by framing the company’s behavior as bullying and denouncing its actions as a violation of user choice. Afterwards, Srinivas issued a statement alleging that his firm had generated hundreds of millions in investment commitments to AWS. 

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