Apple Eyes AI Acquisition to Escape ‘Penalty Box’ and Shed Laggard Label

Apple Inc. has had a rough 2025 so far. Its stock is down over 19%, hurt by lingering trade tensions and investor anxiety over its slow rollout of artificial intelligence features. While rivals have surged ahead with AI breakthroughs, Apple has faced criticism for falling behind—especially with delays to Siri’s evolution and limited integration of its own “Apple Intelligence” platform.

But a potential strategic shift may be in the works.

According to Bloomberg, Apple executives have held internal talks to acquire Perplexity AI, a startup known for its search-based chatbot powered by multiple large language models. While the deal isn’t finalized, the market is already responding. Apple shares have risen nearly 2.4% since the report surfaced on Friday.

For months, Wall Street analysts have flagged Apple’s AI posture as underwhelming. A recent note from TD Cowen suggested that Apple might need to buy or partner with an AI firm to close the gap with peers like Google and Microsoft. Bank of America echoed that sentiment, calling the potential acquisition “positive for shares that are currently in the penalty box.”

Investor frustration has stemmed partly from Apple’s reliance on OpenAI to supply core generative AI features. Confidence took another hit when OpenAI announced in May that it had acquired the AI hardware startup founded by former Apple design chief Jony Ive—a move seen by some as laying the groundwork for a future Apple competitor.

There’s growing concern that if Apple doesn’t innovate quickly in AI, its core product—the iPhone—could lose its centrality. As AI tools become more powerful and ubiquitous, consumer behavior may shift away from traditional handheld devices. Even Meta’s Ray-Ban smart glasses are being positioned as next-gen alternatives.

If Apple moves forward with acquiring Perplexity, analysts see three big upsides: it would gain independent access to generative AI capabilities, improve Siri and other services through tighter integration, and tap into high-value AI talent. It could also enter the search-based ad market—a new potential revenue stream.

Still, the path won’t be easy. Integrating Perplexity’s tech into Apple’s walled ecosystem could pose engineering and user-experience challenges. Legal questions also loom over Perplexity’s data-scraping practices. And any deal of this size—it would be Apple’s largest acquisition ever—comes with risk.

Bank of America has a $235 price target on Apple stock, about 16% above Tuesday’s trading level around $202. The average target among 50 analysts surveyed by FactSet is slightly lower, at $228.

Apple’s next move could determine whether it remains a hardware-first company or finally makes the leap to becoming a serious AI player. For now, Wall Street is watching closely.