- Perplexity AI, an AI chatbot focused on research, has attracted investor attention, reaching a valuation of $520 million. People wonders how to invest in Perplexity AI.
- It’s not publicly traded yet, but investors can indirectly invest through firms holding Perplexity AI shares.
- While currently unprofitable, its potential for growth, backed by notable investors and a growing user base, makes it an intriguing investment opportunity.
Perplexity, an AI chatbot specialised in research, presents itself as an alternative to conventional search engines. Similar to ChatGPT and other AI chatbots, Perplexity utilises a conversational interface, tailoring responses based on user interests and preferences.
Like many players in the AI sector, Perplexity has garnered investor interest, boasting a valuation of $520 million after its latest funding round in March 2024. In this in-depth exploration of Perplexity AI, we’ll delve into whether the stock is publicly traded or slated for an initial public offering (IPO), along with considerations on purchasing it, its profitability, investment prospects, and other pertinent inquiries. In the following section, we will see how to invest in Perplexity AI.
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Is Perplexity AI publicly traded?
At present, Perplexity is not publicly traded, being relatively young since its establishment in August 2022 by Andy Konwinski, Denis Yarats, Johnny Ho, and Aravind Srinivas.
Srinivas, formerly associated with OpenAI, a prominent player in generative AI, now serves as Perplexity’s CEO. Although the company has undergone three funding rounds, the journey from inception to public trading typically spans several years, even for the most promising ventures.
When will Perplexity AI IPO?
There’s no concrete information regarding Perplexity’s IPO plans. Some media sources suggest the potential for another funding round, possibly valuing the company at $1 billion, thus attaining unicorn status—denoting startups valued at $1 billion or more.
Given Perplexity’s recent founding in 2022, it may require several additional years before considering going public. Historically, notable tech IPOs have taken time to materialise, barring the dot-com era, when firms rushed to capitalise on investor appetite. For instance, Alphabet (formerly Google) took six years from its 1998 inception to its 2004 IPO, while Meta Platforms (then Facebook) took eight years from its 2004 founding. Hence, an IPO for Perplexity might not occur until at least 2028.
Post the dot-com era, investor caution prevails with IPOs, necessitating a track record of growth, profitability, and evidence of the AI industry’s sustainability. It may take several more years for Perplexity to furnish compelling evidence aligning with these expectations.
How to invest in Perplexity AI?
As Perplexity isn’t publicly traded, direct stock purchase isn’t an option. However, investors can still gain exposure through various means. Options include investing via venture capital firms or participating in employee stock purchase programs, typically accessible to accredited investors with substantial wealth. Alternatively, investors can consider investing in companies that hold Perplexity shares.
Step 1: Open a brokerage account
To invest in firms holding Perplexity shares, you’ll need a brokerage account facilitating stock transactions. Numerous options exist, such as Charles Schwab, Fidelity, Robinhood, and E-Trade.
Step 2: Determine your budget
Once you have a brokerage account, assess your financial capacity. This should align with your income, assets, and investment outlook. Allocate a portion of your portfolio commensurate with your confidence in the investment, ensuring diversification by limiting exposure to one stock to no more than 10%.
Step 3: Conduct research
Thoroughly research your investment, understanding its merits, drawbacks, and associated risks. Develop an investment thesis outlining conditions warranting a change or purchase of the stock.
Presently, only Nvidia, a publicly traded company, holds Perplexity shares. Given Nvidia’s market dominance in AI hardware, investing in it could indirectly expose investors to Perplexity. While Nvidia’s market cap exceeds $2 trillion and its stake in Perplexity is relatively small, the partnership could bolster Nvidia’s position. There’s also the prospect of Nvidia acquiring Perplexity.
Step 4: Place an order
After setting up a brokerage account, determining your investment amount, and conducting research, proceed to place an order. Market and limit orders are the primary types. Market orders execute at the prevailing market price, while limit orders allow setting a maximum price for purchase or minimum price for sale, offering greater price control. Market orders are usually fulfilled promptly, while limit orders provide price control. The Motley Fool generally recommends market orders.
Is Perplexity AI profitable?
Perplexity, at just 20 months old, has recently started generating revenue. By January 2024, it remained unprofitable, with annual revenue below $10 million. Typically, tech firms prioritise growth initially, aiming to expand market share before focusing on profitability, a strategy Perplexity is likely to adopt.
With ambitions to disrupt Google’s search dominance, Perplexity targets a vast market. The company is expected to continue investing in product enhancement, scaling its computing infrastructure, and marketing efforts to broaden its customer base. Profitability currently takes a back seat to growth.
Should I invest in Perplexity AI?
Assessing Perplexity solely based on financials is challenging due to its youth and modest revenue. Its financial metrics, generating less than $10 million annually, hold limited significance relative to its valuation. Investors should instead weigh its growth potential and ability to seize market opportunities.
BrightEdge reports Perplexity’s organic search share growing monthly by 39%, translating to substantial annual growth. As of January, Perplexity claimed 10 million monthly active users, albeit with a small portion being paid subscribers.
The notable investors backing Perplexity, including Jeff Bezos, Tobi Lutke, and Susan Wojcicki, suggest potential for investment success.
