As AI Costs Soar, Some Startups Consider Selling

The founders of artificial intelligence startups spent much of the past year seeking capital to fund the high cost of developing their software. Now those costs have pushed some to consider another alternative—merging with a larger company.

Perplexity AI, a one-year-old San Francisco–based startup developing an AI-powered search engine, raised $25.6 million last March. By October, the company was generating around $3 million in annual recurring revenue, a measure of subscription sales.

Around that time, several companies expressed interest in acquiring Perplexity, according to a person familiar with the matter. Perplexity’s management entered into discussions with at least four companies because they were concerned about the cost of training AI models and about intense competition from search giant Google, the person said.