MW Why Apple potentially acquiring Perplexity could be big news for its stock

By Laila Maidan

The tech giant could find a way out of the 'penalty box' and cure the perception that it's an AI laggard

Apple Inc.'s stock has had a rough go of it during the first half of the year. President Trump's tariffs caused have weighed on the company, as investors continue to gauge what the full cost to its business will be. Added to the tariff turmoil has been general concern that Apple is behind on developing its artificial-intelligence capabilities while its competitors have raced ahead.

But recent rumblings that the iPhone maker may be considering the acquisition of an AI startup could turn things around quickly.

So far this year, Apple's stock $(AAPL)$ has faced steep losses, losing over 19%. Continued delays to Siri's integration with Apple Intelligence and concerns on Wall Street that the company wasn't spending enough on data-center development have weighed on investor views of the company's future. On June 3, a TD Cowen analyst note suggested that one way Apple could catch up was if it acquired or partnered with an AI company.

On Friday, headlines began to circle that Apple executives had held internal talks to buy startup Perplexity AI, according to Bloomberg. The platform is a search-engine-type chatbot that uses multiple large language models to respond to queries. While there's no guarantee the deal will go through, it's a positive sign that the message has been received over at Apple's headquarters. The stock is up by almost 2.4% since Friday's news.

Bank of America referred to the possibility of Apple's purchase or partnership with the AI startup as being "positive for shares that are currently in the penalty box," since the company has been perceived as an AI laggard.

Here's why this development is so important: Between delays to Apple Intelligence and Apple's decision to partner with OpenAI to provide some AI capabilities, investors weren't hopeful that the company could build its own integrated AI tools. Then, in May, OpenAI announced it was buying former iPhone designer Jony Ive's device startup io, with plans to build "a new family of products" around AI. The move was seen by some investors as a direct threat to Apple, because its so-called AI provider would have the capacity to develop its own hardware that could better integrate with its LLM.

Ted Mortonson, managing director and technology strategist at Baird, previously told MarketWatch that the biggest risk to Apple's dominance in the smartphone sector will be the behavioral shifts of consumers. More specifically, as AI tools improve, the desire to adapt those features will outweigh the draw of Apple's sleek hardware designs if it doesn't keep up with competitors. Additionally, he noted that Apple could face a wider range of competitors because AI capabilities could disrupt the need for handheld devices, meaning even Meta Platforms Inc.'s $(META)$ Ray-Ban smart glasses could one day replace smartphones.

If Apple is able to acquire an AI company like Perplexity, Bank of America analysts say there are numerous advantages. They include Apple gaining instant and direct access to AI capabilities independent of third-party providers - allowing for deeper integration of tools into its services, including to improve Siri and search. The company would also gain access to AI talent. And finally, it could open a new revenue stream through search-based advertising services. All of these would be positive for Apple's stock.

Bank of America's price target for the stock sits at $235 - about 16% above where the stock was trading Tuesday, near $202. The average price target among 50 analysts polled by FactSet sits at $228.

However, analysts at Bank of America acknowledge that there would still be bumps ahead - including challenges posed by merging outside technology into Apple's ecosystem, potential legal issues facing Perplexity's data-scrapping practices, and whether consumers will be satisfied with what Perplexity has to offer. Finally, the acquisition would be the largest in Apple's history, according to the analysts, and that alone creates risk.

-Laila Maidan

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

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June 24, 2025 13:30 ET (17:30 GMT)

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