Now that the Big Tech conference season is behind us, the smart money in Apple Land is saying that CEO Tim Cook should be preparing to open his chequebook for a huge AI deal, so apparent are the company’s shortcomings.
The good news is, Apple has a cash hoard of more than US$130-billion and a way out: it can buy its way into the future. The right acquisition could bring in the talent and technology Apple has clearly lacked — as evidenced by the struggles of its Siri voice assistant and its underwhelming generative AI work. This time, transformational M&A is exactly what the company needs.
The list of potential targets is both long and eye-wateringly expensive. Perplexity AI is the most likely target, and there have been talks at Apple about such an idea — though no approach yet. Other potential deals might include French AI outfit Mistral; the customer-service focused Sierra AI; or even either of the OpenAI alumni-founded Super Safe Intelligence or Thinking Machine Labs.
Acquiring any of them would mean Apple’s largest-ever M&A deal — several multiples bigger than the $3-billion purchase of Dr Dre’s Beats headphone company in 2014, a move that was about setting the quick groundwork for a Spotify competitor, Apple Music. (Apple, notably, did not buy Spotify, as some at the time thought it might.)
Apple doesn’t like large acquisitions. It resorts to them only when it thinks it has an urgent need for product or expertise. This is being seen as one such moment. Its rivals in the artificial intelligence space, most notably Meta Platforms, are marauding through Silicon Valley, offering huge sums to the best AI talent — there is a closing window for Apple to add expertise to its AI team.
No-brainer?
Some say that makes a big deal a no-brainer. A move to buy Perplexity AI, wrote leading tech newsletter author Alex Kantrowicz, would be “such an obviously good deal for both companies that I feel silly even writing it down”. It would bring in expertise to Apple and also an excellent product: Perplexity is a great souped-up search engine that many (myself included) turn to these days instead of Google. I consider it to be a way of almost generating your own Wikipedia page for a niche topic or event of your choosing. It’s not to be fully trusted on the facts but is a great starting point for deeper research.
But does Apple need to buy it? If Google is indeed ordered to stop paying Apple billions of dollars for default search placement on iOS, owning Perplexity would give Apple a ready-made search offering it could use to fill the void. That would be nice, but not $14-billion-plus nice (an offer price would likely be much higher). Perplexity’s product is built on top of AI models from other companies such as OpenAI and Gemini. Were it to earnestly try, Apple could surely do that itself. If it would rather not, it can rest assured knowing the best device on which to use the Perplexity app is an iPhone.
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What Apple truly lacks is a competent foundational AI model that works locally on its devices rather than one that means sending oodles of data to and from an expensive cloud. Aside from the benefit of having more people working on it, buying Perplexity wouldn’t get Apple much closer to that desire.
There’s also another problem: could a deal even be done? The recent trend of big technology companies investing (wink wink) in AI companies instead of acquiring them outright has come to define recent dealmaking activity in this space. It avoids regulatory scrutiny but comes at the expense of control.
I can’t imagine Cook would willingly put himself in the kind of position Microsoft CEO Satya Nadella found himself in when he was caught blindsided by the sudden departure of Sam Altman from OpenAI in November 2023. Nadella’s blitz of business news outlets to offer reassurance that everything was totally fine was one of the more humiliating acts I’ve seen a tech CEO endure. More recently, there are signs that the Microsoft-OpenAI partnership is at risk of falling apart. This kind of unpredictability is unacceptable to Apple, a $3-trillion company built on maniacal control-freakery at every layer.
Above all else, and at risk of sounding like a Nokia executive circa 2007, Apple’s AI problem might seem urgent to Wall Street and the commentariat but, practically speaking, it isn’t. Its profit centres — devices and services to run on them — are secure for the next couple of years, time in which Apple can carefully develop (or provide access to) real AI use cases tightly woven with its hardware. Above all, it can consider what form factors will suit that AI future well, safe in the knowledge it is the very best at doing that.
The old-fashioned way of carefully building a team by hiring good people is still the safest option on the table for Apple. Tantalising salaries for individuals, rather than wholesale teams, is the best use of its money. Could it speed up a better Siri, and other integrated AI tools, by splashing some of its cash pile on an entire AI shop? Possibly. But it’s very far from the no-brainer some believe it to be and could just as likely be a catalyst for bitter culture clashes internally and months of operational and regulatory distraction.
Read: 10 red flags for Apple investors
There are many valid reasons for a company to make a big acquisition. Panic isn’t one of them. Even under pressure from analysts, journalists and shareholders, we know Apple will always prefer to go it alone if it can. — (c) 2025 Bloomberg LP
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