Perplexity AI has initiated a move to merge with TikTok U.S. by submitting a bid to its parent company, ByteDance. The proposal aims to establish a new entity that would integrate Perplexity, TikTok U.S., and new capital partners.
The proposed merger would enable most of ByteDance’s current investors to maintain their equity stakes while boosting Perplexity’s video content offerings. An anonymous source familiar with the discussions indicated that this structure is designed to retain investor interests amid evolving AI technology.
Perplexity AI, which operates as an AI search engine startup, has positioned itself as a competitor to established players like OpenAI and Google. At the beginning of 2024, it was valued at approximately $500 million, but by the end of the year, its valuation surged to nearly $9 billion, driven by growing investor interest in generative AI technologies despite facing challenges related to plagiarism allegations.
Investors perceive AI-enhanced search capabilities as a potential threat to Google, fundamentally altering how users access information online. In the previous year, OpenAI launched SearchGPT, a new search engine that contributed to the generative AI trend that began with ChatGPT in late 2022. In response, Google introduced “AI Overviews” in its search results, which provides users with quick summaries of answers at the top of their queries.
While any agreement between Perplexity AI and ByteDance could take several months to finalise, TikTok has indicated that it would “go dark” in the U.S. unless assurances are provided by the Biden administration regarding non-punishment for service providers like Apple and Google. Meanwhile, President-elect Donald Trump expressed that he would likely extend TikTok’s operational timeline by 90 days after his inauguration on Monday.
In a recent TikTok video, CEO Shou Zi Chew expressed gratitude towards President Trump for his commitment to collaborating on a solution that would keep TikTok accessible in the United States.
Furthermore, ByteDance has suggested it is not inclined to sell TikTok U.S., which is part of why Perplexity AI believes its merger proposal could be viable—since it frames the approach as a merger rather than a sale.
The source indicated that a reasonable valuation for this merger could exceed $50 billion, although the final figure will depend on which existing shareholders of ByteDance wish to remain involved in the new entity versus those seeking to cash out.