Perplexity AI, a startup specializing in artificial intelligence, has introduced a merger proposal with TikTok’s U.S. operations. This proposal aims to resolve growing national security concerns tied to TikTok’s data-sharing practices and its Chinese ownership. The plan includes creating a new entity called “NewCo,” which would house TikTok U.S. and integrate Perplexity AI’s technology. ByteDance, TikTok’s parent company, would retain control of its recommendation algorithm, a key driver of the platform’s popularity.
A NewCo. With U.S. Government Involvement
One standout feature of the merger is the formation of NewCo. This new entity would reduce Chinese ownership and increase U.S. involvement. Under the plan, the U.S. government could acquire a non-voting stake of up to 50% in NewCo. This ownership would follow an initial public offering (IPO) with a valuation of at least $300 billion. By allowing the U.S. government to participate financially without day-to-day control, the structure balances national interests with operational independence.
Reducing ByteDance’s Influence Over TikTok U.S.
A key component of the merger is ByteDance selling TikTok U.S. to NewCo. Current investors in TikTok would be given equity in the new company. Similarly, investors in Perplexity AI would also receive shares in NewCo. This approach ensures existing stakeholders retain financial involvement while reducing ByteDance’s influence over TikTok’s U.S. operations.
Why the Merger Proposal Matters
The merger aims to address longstanding fears about TikTok’s ties to the Chinese government. U.S. lawmakers have raised concerns about TikTok sharing sensitive user data with China. This has prompted calls for ByteDance to divest TikTok U.S. entirely or face a potential ban. The Perplexity AI TikTok merger offers a middle ground by restructuring ownership and prioritizing U.S. interests.
Challenges the Merger Must Overcome
Despite its ambitious goals, the proposal faces significant hurdles. ByteDance has not publicly commented on the merger, and its willingness to sell TikTok U.S. remains uncertain. Moreover, the U.S. government has yet to provide feedback on this revised plan. Approval from lawmakers and regulatory agencies will be crucial for the proposal to proceed.
The Future of the Perplexity AI TikTok Merger
If successful, the merger could serve as a model for resolving conflicts between national security and foreign investment in technology. By reducing Chinese ownership and creating a U.S.-based entity, the proposal provides a clear path forward. However, much will depend on securing buy-in from key stakeholders.
