Perplexity AI Suggests US Stake in TikTok Merger: Report

Perplexity AI has revised its merger plan for TikTok’s parent company, ByteDance, introducing a bold new concept. According to CNBC, the updated plan suggests creating a new company, tentatively called NewCo, where the U.S. government could own a 50% stake after the company goes public. This proposal is designed to address national security concerns while offering a mutually beneficial path forward for both parties.

Details of the Proposed Merger

Formation of NewCo

The merger would bring together TikTok U.S. and Perplexity AI under a single entity named NewCo. However, ByteDance's prized recommendation algorithm would remain excluded from the deal. Instead, ByteDance investors would have the option to exchange their stakes in TikTok U.S. for shares in NewCo, while Perplexity AI investors would do the same.

Funding for NewCo

Outside investors would play a crucial role in funding the deal. These funds would not only facilitate the merger but also pay a one-time dividend to ByteDance’s investors and support the growth of NewCo. The unique funding strategy aims to strengthen the financial foundation of the new entity.

The Rise of Perplexity AI

Growth Trajectory

Perplexity AI’s valuation has skyrocketed over the past year, jumping from $500 million at the start of 2024 to a staggering $9 billion by the end of the year. The rapid adoption of generative AI tools has been a key driver of this exponential growth. With its focus on AI-powered search tools, Perplexity AI has emerged as a competitor to tech giants like Google.

Challenges Along the Way

Despite its success, Perplexity AI has faced criticism, particularly over allegations of plagiarism. These controversies have, at times, cast a shadow over the company’s reputation, but the merger with TikTok U.S. could offer a significant opportunity to reshape public perception.

Benefits of the Merger

For ByteDance

ByteDance has long resisted the idea of selling TikTok U.S., but this merger proposal frames the deal as a partnership rather than a sale. This approach allows ByteDance to retain a stake in TikTok U.S. while securing financial benefits from the merger.

For Perplexity AI

By merging with TikTok U.S., Perplexity AI gains access to TikTok’s massive video platform and user base. This would significantly bolster its ambitions in the AI space and position it as a leader in merging AI-driven search tools with social media platforms.

For the U.S. Government

The potential for the U.S. government to own 50% of NewCo after it goes public could help address longstanding security concerns related to TikTok. This ownership model would provide the government with oversight and mitigate risks tied to foreign influence.

National Security and Political Involvement

Addressing Security Concerns

Perplexity AI’s proposal is strategically crafted to tackle the national security issues that have surrounded TikTok for years. By allowing the U.S. government to have a stake in the new company, the merger aims to alleviate fears of data misuse or foreign surveillance.

Trump Administration’s Role

The Trump administration has been actively involved in determining TikTok’s future in the U.S. Although the app has avoided an outright ban so far, President Trump has hinted at introducing American stakeholders or granting the government a stake in the company. Perplexity AI’s proposal aligns with these objectives, potentially making it a viable solution.

Competitive Landscape

Other Interested Parties

Several major players, including Microsoft, Oracle, and Elon Musk, have reportedly shown interest in TikTok. These competing offers add urgency to ByteDance’s decision-making process, as a final resolution is expected in the coming weeks.

Strategic Timing

The timing of Perplexity AI’s proposal is critical. With global scrutiny on TikTok and growing interest from competitors, the merger plan offers a balanced approach to resolve ongoing disputes while setting the stage for future growth.

Conclusion

Perplexity AI’s innovative merger proposal presents a win-win scenario for all parties involved. By forming NewCo and incorporating U.S. government ownership, the deal addresses security concerns while providing financial and strategic benefits to ByteDance and Perplexity AI. As discussions unfold, this bold proposal could reshape the future of TikTok U.S. and redefine how AI-driven platforms collaborate with global stakeholders.