A rumored AI acquisition would get Apple stock out of 'penalty box,' says Bank of America

Apple is reportedly considering acquiring Perplexity AI, a move Bank of America views as significantly positive for its underperforming shares, which have been seen as an "AI laggard." Analyst Wamsi Mohan maintains a Buy rating and $235 price target, noting the acquisition could enhance Apple's voice assistant capabilities and reduce Google reliance, potentially driving multiple expansion despite the integration and regulatory risks associated with what would be Apple's largest-ever deal. Apple shares have recently underperformed the broader market, though they initially gained on the acquisition report before reversing.

Analysis

Apple's stock (AAPL), which has significantly underperformed with a decline of over 22% in the past six months, is being analyzed in the context of a potential strategic shift in its artificial intelligence strategy. According to a Bank of America research note, a speculative acquisition of Perplexity AI could serve as a major positive catalyst, addressing the market's perception of Apple as an "AI laggard." The analyst, Wamsi Mohan, who maintains a Buy rating and a $235 price target suggesting over 16% upside, posits that such a deal would provide Apple with a superior voice assistant to its delayed Siri and a hedge against its reliance on Google for search capabilities. This could, in turn, drive multiple expansion for the stock. However, the report is based on unconfirmed internal discussions at Apple, with no formal talks with Perplexity management yet initiated. Furthermore, a successful deal would represent Apple's largest-ever acquisition, introducing substantial risks related to regulatory approval, talent retention, and technology integration. A less aggressive partnership is noted as an alternative, but this would likely yield a more muted impact on the stock's valuation. The market's initial enthusiasm was tempered, as the stock's gains on the news were subsequently reversed, reflecting the highly speculative nature of the situation.

Key Decisions for Investors

• Investors should closely monitor any official communication from Apple or Perplexity AI, as the potential acquisition is highly speculative and based on unconfirmed internal discussions.
• The primary investment thesis hinges on balancing the potential for significant multiple expansion from a successful AI acquisition against the execution risks of what would be Apple's largest-ever deal, including regulatory hurdles and integration challenges.
• Consider that a partnership, rather than a full acquisition, represents a lower-risk alternative for Apple to address its perceived AI gaps, though it would likely offer a more modest catalyst for the stock.
• Given the stock's recent underperformance, any concrete progress on AI initiatives, whether through M&A or internal development, should be viewed as a critical potential turning point for investor sentiment.