If Apple is going to be a major player in artificial intelligence, it needs to acquire AI search engine Perplexity, a Wall Street analyst says. Meanwhile, Apple stock has been stuck in neutral.
"Perplexity is the 'no-brainer' deal to help launch Apple's AI strategy," Wedbush Securities analyst Daniel Ives said in a client note Wednesday.
Bloomberg reported last month that Apple executives have held internal discussions about potentially bidding for startup Perplexity AI to gain AI talent and technology. Perplexity's last investment round valued the company at $14 billion.
Apple has fallen behind Big Tech peers Alphabet, Amazon, Meta Platforms and Microsoft in AI, "the biggest tech trend in the last 50 years," Ives said.
Ives rates Apple stock as outperform with a price target of 270. On the stock market today, Apple stock rose 0.5% to close at 211.14.
Apple has failed in its efforts to build AI capabilities internally and time is running out for the company to catch up, he said.
Apple Stock In Consolidation Pattern
"While Apple is fearful of acquisitions historically with its largest deal being the Beats deal for $3 billion in 2014, we believe Cook needs to rip the Band-Aid off and finally do an M&A deal and Perplexity is the answer in our view," Ives said.
"Perplexity's AI algorithms and technology are some of the most impressive in the tech AI world," Ives said. "If Apple has to pay (about) $30 billion, it's a drop in the bucket relative to the monetization opportunity Apple can achieve on AI."
On Wednesday, Perplexity launched Comet, a web browser with AI-powered search capabilities.
Elsewhere on Wall Street, LightShed Partners analysts Walter Piecyk and Joe Galone suggested in a blog post that it might be time for Apple Chief Executive Tim Cook to step down.
Apple is "nowhere with AI" now and has fallen behind rivals and startups, they said.
"Apple now needs a product-focused CEO, not one centered on logistics," Piecyk and Galone said. "Missing on AI could fundamentally alter the company's long-term trajectory and ability to grow at all."
Apple stock is deep in a 28-week consolidation pattern with a buy point of 260.10, according to IBD MarketSurge charts. In a negative sign, it is trading below its 200-day moving average line.
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