2025 has not been kind to Apple stock, which is struggling significantly compared to its peers in the Magnificent Seven. With shares plummeting by 20% year-to-date, can a rumored AI acquisition breathe new life into the tech giant's fortunes?

A Year of Setbacks For Apple

Facing headwinds from disappointing iPhone sales and tariff hurdles, Apple has been left behind in the AI race against other mega-cap tech companies. The recent WWDC event failed to quell Wall Street's anxieties about lackluster features in Apple's AI initiatives, leaving investors eagerly searching for signs of innovation.

Rumors Swirl: Is Perplexity the Answer?

Amidst this bleak landscape, buzz has emerged about Apple's potential acquisition of AI startup Perplexity. While the startup has denied any acquisition talks, speculation persists. Bank of America believes that acquiring Perplexity could be a game-changer for Apple, addressing its faltering AI strategy and rejuvenating its stock.

AI Acquisition: A New Hope?

BofA analysts suggest that "any positive developments around AI initiatives would be good for a stock currently seen as lagging behind." Perplexity, an AI-driven search engine that delivers cited answers rather than mere links, could offer Apple a much-needed AI boost. The acquisition could expedite Apple's entry into advanced AI functionalities, something it has struggled to develop internally.

Revitalizing Siri and More

With Perplexity's advanced technology, Apple could significantly enhance Siri's capabilities, which have been overshadowed by competitors in the chatbot domain. Further integration could expand AI use across Apple's Safari browser and various services, paving the way for a higher stock valuation.

Tread Cautiously: The Risks of Acquisition

However, the road to acquisition is fraught with challenges. Merging a nimble startup like Perplexity into Apple's extensive ecosystem could tell a tale of integration roadblocks, as evidenced by Apple's previous ventures with Siri and Laserlike. Additionally, legal hurdles, including a pending copyright lawsuit against Perplexity, could complicate matters.

Navigating Competition and Strategy

In the hyper-competitive AI landscape, Apple isn't the only player eyeing growth through acquisitions. Other tech giants, like Meta, have sought similar opportunities, underscoring the urgency for Apple to act. Yet a Perplexity acquisition could threaten its existing collaboration with Google, creating potential earnings headwinds.

A Bold Move Towards AI?

Bank of America sees the potential acquisition as a high-risk, high-reward endeavor for Apple. "If they execute well, it could pay off dramatically," noted Wamsi Mohan, the bank's technology analyst. But success hinges on Apple breaking away from its traditional slow and secretive development mentality.

The Price Tag: A Major Investment

Should the acquisition go through, it would mark Apple's largest to date, with Perplexity valued at approximately $14 billion. Although this investment diverges from Apple's typical approach of stock buybacks and dividends, analysts agree that the need to aggressively invest in AI has never been greater. Apple reported a massive $24.8 billion in profits in Q1 2025, which means it could afford this strategic shift.

In a landscape where AI is poised to revolutionize technology, analysts caution that failing to invest could pose a greater risk than the challenges that Apple currently faces.