Can I Buy Stock in Perplexity AI?

Since its rollout in late 2022, ChatGPT has been the AI tool on the minds of the entire investment world. Other chatbots, however, have started to emerge as serious competitors to OpenAI’s breakthrough tool.

One of the most promising of these is Perplexity AI, an AI chatbot created by a company founded the same year GPT debuted. Why is Perplexity gaining so attention from investors and can you buy stock in this potentially disruptive company?

First, a Bit About Perplexity AI

Before answering the question of whether it’s possible to invest in Perplexity AI, let’s take a look at why this company looks like such an attractive investment in the first place.

In a nutshell, Perplexity is a search engine powered by conversational AI. Like the much better-known ChatGPT, Perplexity leverages large language models (LLMs) to power a conversational AI chatbot.

In the case of Perplexity, the chatbot responds to user queries to return search results. This allows for a combination of concise answers to questions and the ability to conduct in-depth research.

In this sense, you can think of Perplexity as a tool somewhere in between a traditional search engine like Google and an AI chatbot like ChatGPT. This combination of uses makes a great deal of sense when you consider the pedigree of Perplexity AI. The company was founded and led by a CEO who has experience both had Google’s DeepMind and Open AI.

In addition to its search functions, users can leverage Perplexity to write computer code, translate documents from other languages and summarize long, in-depth pieces to rapidly find information. These capabilities turn Perplexity into an end-to-end assistant for a wide variety of different tasks.

Can I Buy Stock in Perplexity AI?

Perplexity is not publicly traded, so it is not possible to buy shares in the company other than through private funding rounds.

So far, these private funding rounds have remained exclusive to a limited number of prominent investors, including Stanley Druckenmiller, Jeff Bezos and Daniel Gross.

To a minimal degree, ordinary investors can get exposure to Perplexity by buying shares of publicly traded companies that have made private investments in the AI startup.

The most prominent of these companies is NVIDIA, which contributed to a $73.6 million funding round disclosed earlier this year.

Another publicly traded company that has invested in Perplexity is Databricks. Though owning these stocks gives investors peripheral exposure to Perplexity, it remains very small.

Will Perplexity Go Public?

At the moment, there are no signs of Perplexity pursuing an IPO.

This is hardly surprising, as the company was only founded in 2022 and so hasn’t yet had time to go through the steps that typically precede a public offering.

Though it’s far from impossible that Perplexity could go public one day, it will likely be at least a few more years before an IPO becomes a serious possibility.

How Much Is Perplexity Worth?

Despite not filing to go public, Perplexity’s multiple funding rounds make it possible to come up with a rough picture of the company’s valuation. The most recent attempt to raise capital concluded in late April and valued the company at $1 billion.

Perplexity also claims to generate about $20 million in annual recurring revenue from the subscription version of its chatbot for businesses.

Though it’s unclear exactly how much the company brings in overall, this ARR is only about 2 percent of the company’s valuation. In other words, assuming subscriptions account for a majority of its revenue, Perplexity likely has a price-to-sales ratio in the vicinity of 50.

Despite this seemingly high ratio, early investors in Perplexity have seen the value of their investments rise rapidly. As recently as January, the company was valued at just $520 million.

In other words, the valuation of the company nearly doubled in the span of just four months. Assuming Perplexity continues to increase its revenues and becomes a major search tool, initial investors are set to realize extremely good returns.

Publicly Traded Alternatives to Perplexity AI?

Though you can’t buy stock in Perplexity AI at the moment, there are many other options in the AI space that trade on public markets.

Among the leading companies in this field is Microsoft. Having made a $1 billion investment in OpenAI in 2019, Microsoft gained a huge advantage over other tech giants in AI when the smaller startup debuted ChatGPT.

Microsoft’s enormous ecosystem of software tools also provides it with an excellent platform for rolling out AI-powered products to both individuals and businesses.

For a play on AI hardware, NVIDIA is also a popular choice. The company is estimated to have a market share of between 80 and 95 percent in the world of AI chips, making it by far the dominant provider of hardware to the emergent AI industry.

Though NVIDIA is believed by many to be overvalued at current prices, the company has consistently outperformed expectations and delivered strong returns for its shareholders.

A final popular AI stock is data analytics major Palantir. Beyond having massive know-how when it comes to advanced data processing, Palantir also has a significant head start in AI for government and defense applications.

The company is rapidly expanding its offerings for private-sector clients, but its base of government contracts provides it with a reliable flow of annual revenue.

Combined with an aggressive approach to seizing market share in the still quite young AI marketplace, these advantages may very well make Palantir a good long-term performer.

So, while you may not be able to buy Perplexity right now, there are several options that could allow you to take advantage of the growing demand for AI technology.

Perplexity may well undergo an IPO at some point in the future, but waiting for an eventual public offering could cause investors to miss out on multiple years of positive returns elsewhere. Until Perplexity becomes available, investors will likely do better to explore the many AI-focused companies that are already trading publicly and generating earnings.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.