Historically, Apple was the quietest tech giant in terms of dealing, and launched a speculation game in Silicon Valley last week when CEO Tim Cook said he was looking for a deal.
“We are very open to M&As that accelerate our roadmap,” Cook said. Company revenue callsee mergers and acquisitions. “We basically ask ourselves whether the company can help accelerate its roadmap. If so, we're interested.”
Apple's stock has fallen about 10% this year, partly down due to concerns from investors that it is falling behind in the AI race.
“There's a lot of pressure on Apple's leadership to do something,” said Gil Luria, head of technology research at Da Davidson. “That's a lot of what we've heard in our revenue calls and what our leadership team acknowledges. We want you to do something with us, we hear you.
With around $133 billion in cash on hand, Apple can afford to spend a lot, but generally prefers rif around. However, it suggested that strategies could change.
“We're not stuck in a company of a certain size,” he said.
Cook said Apple purchased seven small businesses this year from “All Life Walks” and traded once every few weeks. That last major deal came over a decade ago when I bought Beats Electronics for $3 billion in 2014.
What is the AI version of this now? One high-tech banker, who called for it to remain anonymous, mentioned AI-powered media creation startups such as Runway AI, Eleven Lab and Pika AI.
Apple's core is about consumer experience, creativity and media. So, bankers said it's better to focus their acquisitions on AI startups that will help them make progress in these areas.
It would probably rule out startups like humanity and co-focused with enterprise users.
The obvious company here is Openai, currently at the pinnacle of Apple's App Store. The banker said Apple should have bought Openai, but said the ship is highly likely as the startup's valuation could be headed towards $500 billion.
According to Luria, there are also regulatory concerns whether the company is too big.
“For most intents and purposes, large M&As are currently off limits for these companies,” Luria points to meta-scale AI investments as a blueprint for how Apple will proceed with partnerships and investments rather than acquisitions.
So, what do you need on your Apple shopping list? BI asked these sources:
Jim McVeigh, a longtime investment banker and founder and CEO of Cyndx, is an AI-driven platform for the private capital markets
Gil Luria, Head of Technology Research at Da Davidson
Dan Ives, managing director and equity research analyst at Wedbush Securities
Jordan Tibodeau, former Google M&A and co-host of SVIC podcasts
Sarah Guo, Founder and Managing Partner of Confidence
Confused
Aravind Srinivas, CEO of Perplexity.
Kimberly White/Getty Images by TechCrunch
What it does: AI-equipped search engine
Who thinks this is a good idea: Jim McVay, Gil Luria, Jordan Thibodeau, Dan Ives
According to Luria, why does it make sense:
Perplexity is one of the biggest AI companies that have yet to have a major technology sponsor. (Nvidia and Jeff Bezos are existing investors, and the size of their interests is unknown.)
The Department of Justice's continued anti-trust fight with Google allowed us to see a federal judge who has determined that Google will end its transaction as Apple's default search engine. That potential ruling was on the horizon, and “if Apple was trying to give consumers a choice, that confusion was probably pretty high on the list of options,” Luria said.
According to McVeigh, why does it make sense:
Integrating Perplexity's Genai with the Apple Ecosystem could turbocharge Siri and spotlights, significantly improving natural language capabilities and context search.
Apple helps compete with Google and Microsoft, who embed advanced AI in their platform.
Perplexity has been proven to be market traction and product market suited to Apple's immediate lift.
According to Ives, why does it make sense:
Ives is called Perplexity as Apple attempts to charge AI features and catch up with its big tech peers. “Apple is watching the AI revolution go by them. It was a treadmill situation. They're playing late. Investors want to see them rip band-aids and trade and make big partnerships,” he told Bi.
He said it would provide scrutiny of regulations that Apple could face acquisitions, so that it shouldn't prevent the company from pursuing confusion and dealing in any way. “For Apple, the time is ticking by,” he said.
According to Thibodeau, why does it make sense:
“This feels like an obvious choice,” Thibodeau said. “Their business is being cornered by Google and Openai, so I think [cofounder and CEO Aravind Srinivas] I'll bend my knees and go for the acquisition. There is no shame. It's going to be a tough battle as growth isn't as fast as it should be, and I don't think the VC will fund it forever. ”
“Apple has enough deep pockets to give Aravind the money he needs to train his own basic model, so Apple hasn't seen it use Openai to power Siri Intelligence (Oxymoron) or baffling searches.”Thibodeau said.
According to Luria, why does it make no sense:
It is unclear whether the exploitative acquisition will clear regulatory hurdles in the face of antitrust concerns.
According to McVeigh, why doesn't it make sense:
The acquisition is expensive given Perplexity's reported $18 billion valuation.
There could be a cultural discrepancy that integrates Apple with a rapidly growing VC-driven startup.
“We are humbled that many of the world's best phone makers are interested in bewilderment, but aside from our own acquisitions, we are unaware of the M&A debate that involves bewilderment.”
Mistral AI
Arthur Mensch, co-founder and CEO of Mistral AI.
Ludovic Marin/Pool/AFP via Getty Images
What it does: Open Source LLM Builder Based in Europe
Who thinks this is a good idea: Gil Luria and Ben Thompson
According to Luria, why does it make sense:
The top tier of frontier model companies, including Openai, Anthropic, Xai and Google, is to “run away” in AI races.
These companies are probably off limits at this point due to large apple investments, given the size they have reached and the existing large technology sponsorships. Openai has Microsoft, Anthropic has Amazon and Google, and Xai has Elon Musk. Apple needs to resort to startups with “second-tier” foundation models like Mistral.
Mistral could not compete at the highest level with other basic models. This is because there is a lack of the large amount of GPU needed for large-scale AI development that can be accessed by open eyes and humanity.
The Apple contract could help Mistral close that resource gap while allowing Apple access to Mistral's team and LLMS.
“Apple may be in a position to buy labs that have talented teams but have no resources. By providing resources, and by providing resources, it means a large GPU cluster.
According to Thompson, why does it make sense:
According to Luria, why does it make no sense:
Apple was able to pursue another company in the territory of this second tier frontier model, except for Mistral.
Mistral is taking independent steps to address Luria's criticism, including working with NVIDIA to increase GPU capacity.
The CEO said in January that Mistral “is not on sale” and would instead look to IPOs in the future.
Mistral did not respond to requests for comment for this story.
oomii
oomii website.
oomii
What it does: Developing retinal scan display technology for augmented reality
Who thinks this is a good idea: Jim McVay
According to McVeigh, why does it make sense:
Oomii's VR technology will also boost Vision Pro significantly and unlock new features on iPhone and iPad.
Getting Oomii will provide you with a great defense against the meta, which has billions of investments in VR.
oomii does not have VC funds and does not have a simple cap table. This makes it easier to get.
According to McVeigh, why doesn't it make sense:
Oomii's small scale, potential lack of commercial traction, and limited market validation may be present.
Oomii did not respond to requests for comment on this story.
Synthpop
Synthpop's website.
Synthpop
What it does: AI for health care management
Who thinks this is a good idea: Jim McVay
According to McVeigh, why does it make sense:
This transaction could significantly enhance Apple's HealthKit strategy.
The company focuses on privacy, security and a seamless user experience. This is a feature of all Apple.
The founder has experience in AI and healthcare.
The acquisition costs will be lower.
Synthpop has the attractive healthcare automation intellectual property that works with a network of US insurance and hospitals.
According to McVeigh, why doesn't it make sense:
The company is an early stage startup, focusing primarily on the US.
Capital investments from Apple need to expand globally and navigate other regulatory environments outside the US.
Synthpop did not respond to requests for comment for this story.
Thinking Machine Lab
Former Openai Mira Murati founded Thinking Machines Lab.
Patrick T. Fallon via Getty Images
What it does: AI Lab Founded by Mira Murati, former Chief Technology Officer of Openai
Who thinks this is a good idea: Sarah Guo (Investor at Thinking Machines Lab)
According to Guo, why does it make sense:
“For Apple to partner with major independent AI labs like thought machines is about changing the game,” says Guo. “They have a huge threat and opportunity throughout the Apple experience.”
Using memory and personalization to fundamentally improve Siri's experience with Apple's mobile data is a great opportunity, even if Siri has not kept up to the fierce pace of AI capabilities up until now.
Why doesn't it make sense:
Murati has already raised $2 billion at a valuation of $2 billion and appears to be determined to continue as an independent company.
