Bank of America said in a recent report that buying an AI company would help Apple stock escape the penalty box. The note comes after Apple reportedly held talks to acquire Perplexity AI.
Why does Apple need Perplexity?
Last week, Bloomberg reported that Apple’s executives have spoken about acquiring Perplexity AI in order to get more AI talent and technology.
The discussions are at an early stage, and it may not lead to an offer, the report said.
A deal like this would help Apple make an AI-based search engine. This would help offset the potential loss of a partnership with Google.
Google is reportedly paying Apple $20 billion per year to make it the default search engine in Apple’s devices. The deal is under threat due to a US antitrust case.
The report added that Apple management has not discussed the potential deal with Perplexity management.
Apple’s escape route
Bank of America analyst Wamsi Mohan said any AI deals would help the iPhone maker’s stock.
“Any such deal (we do not have any direct knowledge of the probability of such a deal) would likely be positive for shares that are currently in the penalty box given Apple is largely viewed as an AI laggard (deep Siri integration delayed and no cutting edge models)”, Mohan wrote.
The analyst maintained a buy rating on the stock with a price target of $235, indicating a 16% upside from Monday’s closing price.
Mohan said that Perplexity AI can address some of the key issues that the company is facing, including a better voice assistant than Siri.
It can also act as a hedge against the Google deal, he added.
Apple shares have fallen more than 21% in the last 6 months. The once most valuable company in the world has underperformed the broader market.
The S&P 500 index in the last 6 months is up 0.87%.
Apple’s AI woes
Apple’s Worldwide Developers Conference (WWDC) 2025 offering left investors disappointed as the iPhone maker didn’t make many AI announcements.
The much-awaited Siri overhaul, which Apple promised in 2024, didn’t come with the announcements, as the company said, Siri features didn’t meet its “high-quality bar”.
This had disappointed investors, and the stock fell 1.9% during the keynote presentation.
Wamsi noted that any near-term progress in Apple’s AI efforts could be a positive catalyst for the stock and potentially lead to multiple expansion.
However, he cautioned that if a deal were to materialize, it would represent Apple’s largest acquisition to date, which introduces certain risks.
These risks include potential regulatory challenges, difficulties in retaining key talent, and the complexities of integrating new technologies.
Wamsi also suggested that instead of a full acquisition, Apple might consider forming a partnership with Perplexity AI.
While this could be a “more balanced approach,” he added, it may not generate the same degree of valuation uplift for the stock.
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