SoftBank Group Corp.'s Vision Fund 2 is investing between $10 million and $20 million in Perplexity AI, a U.S.-based artificial intelligence search startup, at a valuation of $3 billion, Bloomberg News reported on Thursday, citing people familiar with the matter. This investment is part of a larger $250 million funding round and reflects SoftBank's increasing focus on the rapidly growing field of generative AI.
Founded less than two years ago by Aravind Srinivas and Denis Yarats, Perplexity AI offers a conversational AI answer engine that provides instant answers to questions using the latest information from the web, complete with sources and citations. The startup utilizes various large language models (LLMs) from OpenAI to Meta's open-source Llama to summarize and generate information.
Perplexity AI has seen impressive traction, serving over 500 million queries in 2023 while spending minimal marketing dollars. In January, the company raised $73.6 million from investors including Nvidia, Amazon founder Jeff Bezos, Databricks, NEA, and Sequoia at a valuation of $520 million. This latest funding round led by SoftBank marks a nearly six-fold increase in valuation in just six months.
The investment in Perplexity AI aligns with SoftBank's ambitious plans in artificial intelligence. Masayoshi Son, the founder and CEO of SoftBank Group, is planning a $100 billion AI chip venture and has made AI a key focus of the company's strategy. The SoftBank Vision Fund has been exploring investments in several prominent AI startups like OpenAI and Mistral.
SoftBank is not alone in partnering with Perplexity AI. The startup also entered a strategic partnership with Germany's Deutsche Telekom in April 2024. These carrier partnerships aim to expand Perplexity's user base and data touchpoints in key international markets. SoftBank and its mobile subsidiaries Y!mobile and LINEMO will offer free one-year subscriptions to Perplexity Pro, the search engine's premium tier, to over 300 million mobile customers starting June 19.
Perplexity Pro provides users access to the latest LLMs for enhanced search and data processing capabilities. Premium features include generating high-quality images in various styles based on search history, an AI profile for personalized results, and chat-based support tools.
The Perplexity AI investment exemplifies the growing interest and investment in generative AI search as a potential rival to Google's search dominance. The startup's ability to provide accurate, current answers with clear attribution using natural language conversations powered by LLMs has garnered attention from users and investors alike.
However, Perplexity AI faces criticism from publishers over how their work is credited in the AI-generated answers. CEO Aravind Srinivas says the company is working on revenue-sharing deals to address these concerns as it scales up its service.
Competition in the AI search space is intensifying, with tech giants like Microsoft and Google heavily investing in integrating generative AI capabilities into their search engines. Google is reportedly testing an AI chatbot called “Apprentice Bard” and new search page designs that could be its biggest update in over a decade.
Perplexity AI's rapid growth and backing from major investors like SoftBank and Nvidia demonstrate the immense potential and interest in AI-powered search and knowledge sharing. As the company expands its partnerships, improves its models, and addresses publisher concerns, it is well-positioned to be a significant player in the evolving search landscape.
However, challenges remain in building profitable business models around AI search, with some investors questioning the unit economics and market dynamics. High compute costs for training and inference could compress margins. The increasing availability of open-source models may commoditize the space. Navigating publisher relationships and regulatory concerns around data usage and attribution will also be key.
Despite the hurdles, the race to reshape search with generative AI is well underway. SoftBank's bet on Perplexity AI is the latest sign that the future of search is conversational, personalized, and powered by large language models. As the technology continues to advance at a breakneck pace, consumers stand to benefit from a new paradigm of knowledge discovery and sharing.
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