Apple Inc (NASDAQ:AAPL, ETR:APC) risks falling behind in the fast-moving artificial intelligence race unless it acts quickly, Wedbush analysts said on Wednesday, urging the tech giant to acquire AI search engine Perplexity to bolster its AI platform.
Despite boasting the world’s largest consumer installed base with 2.4 billion iOS devices and 1.5 billion iPhones, Apple has lagged behind AI leaders such as Nvidia, Microsoft, Alphabet, Amazon, Meta, OpenAI and Oracle, the firm said in a note.
“Apple is at a highway rest stop on a bench watching this 4th Industrial Revolution race go by at 100 miles an hour,” Wedbush’s Dan Ives wrote, adding the company’s window to compete effectively in consumer AI is narrowing.
Apple’s traditional approach of developing AI technology internally appears increasingly inadequate amid rapid advancements and growing investor and developer disappointment, Wedbush said. The recent Worldwide Developers Conference (WWDC) featured scant AI innovation, marking a “snoozer” event for AI enthusiasts.
“While Apple historically shies away from large acquisitions—the Beats purchase in 2014 remains its biggest deal—this is the moment to rip the band-aid off,” Ives said. “Perplexity is the ‘no brainer’ deal to help launch Apple’s AI strategy.”
Perplexity, valued at approximately $14 billion in its latest funding round, is an AI-powered search engine with technology that could integrate well with Apple’s voice assistant Siri and transform its AI capabilities. Wedbush estimates that even a $30 billion acquisition price would be modest relative to the monetization potential Apple could unlock in AI.
The firm also noted increasing competitive pressure from Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB), which has aggressively invested in AI talent and technology, including a $14 billion investment in Scale AI, highlighting the growing stakes in the AI space.
Furthermore, with Google currently embroiled in a legal dispute over search partnerships, Apple faces both defensive and offensive strategic imperatives in the AI and search markets.
Wedbush concluded that an acquisition of Perplexity would “get Cupertino off this AI treadmill on 2.0 speed” and could position Apple to rival AI leaders such as ChatGPT.
Wedbush has an Outperform rating and a 12-month price target of $270 on the stock.