Perplexity AI is reportedly in late-stage talks to raise $500 million at a $14 billion valuation, a source familiar with the situation confirmed to CNBC on Monday.
According to the source, Accel, the venture capital firm based in Palo Alto, is set to lead the round, although the details are not finalized yet. The Wall Street Journal first reported on these late-stage numbers.
This new round of funding represents the lower end of Perplexity’s initial raise target, which was between $500 million and $1 billion, with an expected post-money valuation of $18 billion, as reported by CNBC in March.
Rapid Growth Amidst Growing Competition
Perplexity AI, which is focused on its artificial intelligence search engine, competes with heavyweights like Google and Microsoft-backed OpenAI. Its valuation in December stood at $9 billion, a significant jump from $3 billion just six months earlier in June 2024.
The company has already achieved just under $100 million in annual recurring revenue (ARR), according to the source who spoke to CNBC in March.
Perplexity AI is riding the wave of the generative AI boom, which began in late 2022 following the release of OpenAI’s ChatGPT. The company is betting big on the success of its upcoming AI agent web browser, Comet, which aims to stand out in the competitive AI space.
However, the competition in the AI search market is intensifying. Anthropic launched its own web search product in March, allowing its Claude chatbot to display real-time search results to a subset of users. Additionally, OpenAI introduced a search feature within its ChatGPT chatbot last fall, positioning itself as a competitor not just to Perplexity, but also to established search engines like Google and Microsoft’s Bing.
Google itself has launched AI Overviews within its search product, though the feature has sparked some controversy due to high-profile errors following its release.
Author’s Opinion
Perplexity AI’s rapid growth is impressive, and its move to raise $500 million shows its ambition to expand further. However, the increasing competition in the AI search market, especially from OpenAI and Google, will make it challenging for Perplexity to maintain its edge. While Perplexity’s Comet browser has the potential to disrupt the market, it’s up against some of the biggest names in tech. It will need to continually innovate and offer unique value to users if it hopes to stay ahead in this crowded field.
Featured image credit: PYMNTS
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