Chip giant Nvidia is in discussions to take a stake in Perplexity, an artificial intelligence startup that makes a search engine and digital assistant tools, according to a report from The Information. The investment would come as part of a funding round that values the company at more than $30 billion.
That valuation would mark a significant step up from the $20 billion figure The Information reported in September last year. The jump reflects how quickly Perplexity says its business is scaling, with the company's annualized revenue now past $750 million, up from under $250 million at the start of the year.
What is Perplexity?
Perplexity is one of a wave of startups trying to challenge Google in online search by using large language models to answer questions directly, rather than returning a list of links. The company also sells “agent” tools that can carry out tasks on a computer, such as booking a flight or filling out a form, on behalf of a user.
Its revenue growth has been driven by customers paying for premium versions of its products, which offer more advanced features and higher usage limits. The company has said it plans to hold an initial public offering by 2028, a timeline that would give it several more years to build out its business before tapping public markets.
Why Nvidia is interested
Nvidia is best known as the dominant maker of the graphics processing units (GPUs) that power most AI systems. But the company has also been making strategic investments in AI startups, both to encourage the use of its chips and to gain exposure to the fast-growing AI software market.
Investing in Perplexity would give Nvidia a stake in one of the more prominent AI search startups, potentially creating a closer relationship between the two companies. It would also add to Nvidia's growing list of AI-related investments, which have included stakes in other high-profile startups.
The move comes as Nvidia's own earnings are closely watched by investors, with the company's results often moving the broader market. Nvidia's earnings are seen as a bellwether for the AI trade, and any sign of weakening demand for its chips could ripple through the sector.
What it means for investors
For everyday investors, this news is a reminder of how hot the AI startup funding environment remains. Valuations are climbing quickly, and companies like Perplexity are growing revenue at a rapid clip, but they are also burning through cash as they invest in technology and marketing.
The reported $30 billion valuation is a private market figure, and it is not yet clear how much Nvidia would invest or at what exact terms. The Information's report is based on unnamed sources, and the deal could still fall through or change.
For those who own Nvidia stock, the investment is unlikely to have a material impact on the company's financials, given its massive size. But it does signal that Nvidia is looking beyond just selling chips and wants to be a player in the AI application layer as well.
For those interested in Perplexity, the company is still private, so there is no way to buy shares directly. The planned 2028 IPO could eventually give retail investors a chance, but that is still years away and there is no guarantee the company will meet that timeline.
The bigger picture
The AI boom has driven a surge in funding for startups across the sector, from model makers to application companies. Alibaba's recent $10.2 billion share sale to fund its AI push is another example of how companies are raising large sums to compete in this space.
At the same time, there are questions about whether the AI rally is sustainable. Some investors worry that the huge spending on AI infrastructure may not translate into profits for years. Broadcom's reported consideration of a $100 billion debt raise to fund AI-related deals shows how much capital is flowing into the sector.
For now, the Perplexity-Nvidia talks are just that — talks. But they highlight the ongoing consolidation and cross-investment in the AI industry, as the biggest players look to secure their positions in what could be the next major computing platform.
