A newly revised proposal from Perplexity AI could reshape the future of TikTok in the United States, offering the U.S. government a nonvoting stake of up to 50% in the app's U.S. operations as part of a complex merger plan with ByteDance. The proposal, submitted last week to TikTok's Chinese parent company ByteDance, comes amid escalating scrutiny over the app's Chinese ownership and national security concerns.
The plan, which involves creating a new U.S.-based holding company named "NewCo," would merge TikTok's U.S. business with Perplexity AI and pave the way for a public offering valued at $300 billion or more. According to multiple sources, ByteDance would retain equity in the new entity but relinquish operational control to a U.S. board.
The U.S. government's potential stake, while nonvoting, is seen as a strategic compromise to address concerns about data security and influence over the app's algorithm. TikTok, a wildly popular short-video platform, has faced bipartisan backlash, with lawmakers and intelligence officials warning that ByteDance's ties to Beijing pose a significant risk to U.S. national security.
ByteDance has yet to publicly comment on the proposal. TikTok also declined to respond to requests for comment from major news outlets, including the Associated Press.
The new proposal revises an earlier plan presented on January 18, just one day before a U.S. law banning TikTok went into effect. While TikTok briefly shut down its U.S. operations following the ban, President Donald Trump issued an executive order delaying enforcement by 75 days, allowing negotiations to continue.
Trump, who has been both a critic and a supporter of TikTok during his political career, has said he would only approve a deal if it benefits the United States. "We have a lot of interest in it, and the United States will be a big beneficiary," Trump said recently.
The revised plan appears to align with strategies previously suggested by former Treasury Secretary Steven Mnuchin. "The technology needs to be disconnected from China," Mnuchin said. "There's absolutely no way that China would ever let us have something like that in China."
Perplexity AI, a rising competitor in the artificial intelligence space, has gained prominence with its innovative generative AI technologies. The company, valued at $9 billion by late 2024, has positioned itself as a challenger to major players like OpenAI and Google. Its involvement in the TikTok deal underscores the broader convergence of AI and social media platforms, with implications for data governance and algorithmic transparency.
The U.S. government's stake in TikTok would mark an unprecedented move in the regulation of a private tech company. While the stake would not grant voting rights, it would symbolize a significant shift in how Washington approaches foreign-owned technology firms operating domestically. The move is also part of a broader effort to address concerns about the misuse of user data collected on the platform.
TikTok's parent company, ByteDance, has been under fire for its alleged ties to the Chinese government, though the company has repeatedly denied any wrongdoing. The Biden administration argued in court that ByteDance's control of TikTok's algorithm posed too great a risk to U.S. users.
The proposal also comes as other major players, including Oracle and Microsoft, explore deals to acquire TikTok's global operations. Oracle, in particular, has previously been involved in discussions about becoming TikTok's "trusted technology partner" in the U.S.
The proposed structure involving NewCo would distribute equity among Perplexity AI, ByteDance, and other investors. The financing would include third-party capital, enabling a one-time dividend payment to ByteDance shareholders. However, the exact valuation of the deal will depend on ByteDance shareholders' participation.
