Inside Apple’s High-Stakes Debate Over Acquiring AI Startups Like Mistral and Perplexity

Apple’s Internal Debate on AI Acquisitions

Apple executives have recently engaged in discussions about acquiring artificial intelligence firms, eyeing companies like Mistral AI and Perplexity. This signals a strategic move to strengthen Apple’s position in AI. Senior Vice President Eddy Cue is a strong advocate for this approach, believing that acquiring established AI companies offers a faster path to enhancing Apple’s capabilities.

Cue has a history of supporting acquisitions, having pushed for deals with Netflix and Tesla, though CEO Tim Cook rejected those proposals. Meanwhile, Apple’s leadership remains divided. Services chief Eddy Cue champions buying AI startups, while software engineering head Craig Federighi favors developing AI technology internally, confident Apple can outperform competitors without large acquisitions.

This debate has contributed to Apple’s historically cautious stance on big acquisitions. The company’s largest purchase was Beats Electronics for $3 billion, followed by Intel’s modem business at around $1 billion. Potential deals for Mistral or Perplexity would likely surpass these amounts, making Apple hesitant due to its preference for smaller, targeted technology buys.

Why AI Search Technology Matters to Apple

Apple’s interest in AI firms closely ties to its search engine challenge. The company currently relies on Google as the default search engine in Safari, generating an estimated $20 billion annually. However, growing regulatory pressure and U.S. antitrust cases threaten this lucrative deal.

If the Google-Apple search agreement is disrupted, Apple will need alternative search technology quickly. Perplexity’s AI-powered search engine offers a promising solution by delivering conversational answers with cited sources, unlike traditional search engines that simply list links.

Acquiring Perplexity could allow Apple to replace Google’s search functionality with its own AI-driven solution, integrating smoothly across Apple’s ecosystem and preserving revenue. This potential acquisition, alongside Mistral AI, represents a strategic pivot that could reshape Apple’s AI capabilities and independence in search technology.

Key Points of Contention Within Apple

• Eddy Cue’s Position: Supports acquiring AI startups to accelerate Apple’s AI progress.
• Craig Federighi’s Position: Prefers to build AI solutions internally, emphasizing quality and control.
• Apple’s Acquisition History: Conservative, with only a few multibillion-dollar purchases.
• Potential Acquisition Costs: Mistral or Perplexity deals could exceed previous acquisition sizes.

Frequently Asked Questions

Which AI companies is Apple considering acquiring?

Apple has discussed acquiring Mistral AI and Perplexity, two startups specializing in different AI technologies.

Why would Apple want to acquire an AI company?

Acquisitions provide immediate access to advanced AI technologies and expertise, helping Apple accelerate its AI development.

What is Mistral AI known for?

Mistral AI focuses on open-weight large language models, creating efficient AI systems suited for reasoning and coding tasks.

How does Perplexity’s technology work?

Perplexity combines large language models with real-time web indexing to offer conversational answers backed by cited sources.

Who at Apple supports these acquisitions?

Services chief Eddy Cue is the primary proponent, while other executives prefer internal development.

How might regulatory issues affect Apple’s plans?

Antitrust scrutiny threatens Apple’s search deal with Google, increasing the value of owning AI search technology internally.

For executives focused on strategy, understanding these internal dynamics is crucial. Apple’s cautious but potentially transformative approach to AI acquisition could impact its competitive standing and the broader tech landscape.