Perplexity.ai

It was apparently a busy weekend for key players involved in Donald Trump’s efforts to make a deal to save TikTok.

Perhaps the most appealing option for ByteDance could be if Trump blessed a merger between TikTok and Perplexity AI—a San Francisco-based AI search company worth about $9 billion that appears to view a TikTok video content acquisition as a path to compete with major players like Google and OpenAI.

On Sunday, Perplexity AI submitted a revised merger proposal to TikTok-owner ByteDance, reviewed by CNBC, which sources told AP News included feedback from the Trump administration.

If the plan is approved, Perplexity AI and TikTok US would be merged into a new entity. And once TikTok reaches an initial public offering of at least $300 billion, the US government could own up to 50 percent of that new company, CNBC reported. In the proposal, Perplexity AI suggested that a “fair price” would be “well north of $50 billion,” but the final price will likely depend on how many of TikTok’s existing investors decide to cash out following the merger.

ByteDance has maintained a strong resistance to selling off TikTok, especially a sale including its recommendation algorithm. Not only would this option allow ByteDance to maintain a minority stake in TikTok, but it also would leave TikTok’s recommendation algorithm under ByteDance’s control, CNBC reported. The deal would also “allow for most of ByteDance’s existing investors to retain their equity stakes,” CNBC reported.

But ByteDance may not like one potential part of the deal. An insider source told AP News that ByteDance would be required to allow “full US board control.”

According to AP News, US government ownership of a large stake in TikTok would include checks to ensure the app doesn’t become state controlled. The government’s potential stake would apparently not grant the US voting power or a seat on the merged company’s board.

A source familiar with Perplexity AI’s proposal confirmed to Ars that the reporting from CNBC and AP News is accurate.

Trump denied Oracle’s involvement in talks

Over the weekend, there was also a lot of speculation about Oracle’s involvement in negotiations. NPR reported that two sources with direct knowledge claimed that Trump was considering “tapping software company Oracle and a group of outside investors to effectively take control of the app’s global operations.”

That would be a seemingly bigger grab for the US than forcing ByteDance to divest only TikTok’s US operations.

“The goal is for Oracle to effectively monitor and provide oversight with what is going on with TikTok,” one source told NPR. “ByteDance wouldn’t completely go away, but it would minimize Chinese ownership.”

Oracle apparently met with the Trump administration on Friday and has another meeting scheduled this week to discuss Oracle buying a TikTok stake “in the tens of billions,” NPR reported.

But Trump has disputed that, saying this past weekend that he “never” spoke to Oracle about buying TikTok, AP News reported.

“Numerous people are talking to me. Very substantial people,” Trump said, confirming that he would only make a deal to save TikTok “if the United States benefits.”

All sources seemed to suggest that no deal was close to being finalized yet. Other potential Big Tech buyers include Microsoft or even possibly Elon Musk (can you imagine TikTok merged with X?). On Saturday, Trump suggested that he would likely announce his decision on TikTok’s future in the next 30 days.

Meanwhile, TikTok access has become spotty in the US. Google and Apple dropped TikTok from their app stores when the divest-or-ban law kicked in, partly because of the legal limbo threatening hundreds of billions in fines if Trump changes his mind about enforcement. That means ByteDance currently can’t push updates to US users, and anyone who offloads TikTok or purchases a new device can’t download the app in popular distribution channels.

“If we can save TikTok, I think it would be a good thing,” Trump said.

Could Trump’s plan violate divest-or-ban law?

The divest-or-ban law is formally called the Protecting Americans from Foreign Adversary Controlled Applications Act. For months, TikTok was told in court that the law required either a sale of TikTok US operations or a US ban, but now ByteDance seems to believe there’s another option to keep TikTok in the US without forcing a sale.

It remains unclear if lawmakers will approve Trump’s plan if it doesn’t force a sale of TikTok. US Representative Raja Krishnamoorthi (D-Ill.), who co-sponsored the law, issued a statement last week insisting that “ByteDance divesting remains the only real solution to protect our national security and guarantee Americans access to TikTok.”

Krishnamoorthi declined Ars’ request to comment on whether leaked details of Trump’s potential deal to save TikTok could potentially violate the divest-or-ban law. But debate will likely turn on how the law defines “qualified divestiture.”

Under the law, qualified divestiture could be either a “divestiture or similar transaction” that meets two conditions. First, the transaction is one that Trump “determines, through an interagency process, would result in the relevant foreign adversary controlled application no longer being controlled by a foreign adversary.” Second, the deal blocks any foreign adversary-controlled entity or affiliate from interfering in TikTok US operations, “including any cooperation” with foreign adversaries “with respect to the operation of a content recommendation algorithm or an agreement with respect to data sharing.”

That last bit seems to suggest that lawmakers might clash with Trump over ByteDance controlling TikTok’s algorithm, even if a company like Oracle or Perplexity serves as a gatekeeper to Americans’ data safeguarding US national security interests.

Experts told NPR that ByteDance could feasibly maintain a minority stake in TikTok US under the law, with Trump seeming to have “wide latitude to interpret” what is or is not a qualified divestiture. One congressional staffer told NPR that lawmakers might be won over if the Trump administration secured binding legal agreements “ensuring ByteDance cannot covertly manipulate the app.”

The US has tried to strike just such a national security agreement with ByteDance before, though, and it ended in lawmakers passing the divest-or-ban law. During the government’s court battle with TikTok over the law, the government repeatedly argued that prior agreement—also known as “Project Texas,” which ensured TikTok’s US recommendation engine was stored in the Oracle cloud and deployed in the US by a TikTok US subsidiary—was not enough to block Chinese influence. Proposed in 2022, the agreement was abruptly ended in 2023 when the Committee on Foreign Investment in the United States (CFIUS) determined only divestiture would resolve US concerns.

CFIUS did not respond to Ars’ request for comment.

The key problem at that point was ByteDance maintaining control of the algorithm, the government successfully argued in a case that ended in a Supreme Court victory.

“Even under TikTok’s proposed national security agreement, the source code for the recommendation engine would originate in China,” the government warned.

That seemingly leaves a vulnerability that any Trump deal allowing ByteDance to maintain control of the algorithm would likely have to reconcile.

“Under Chinese national-security laws, the Chinese government can require a China-based company to ‘surrender all its data,'” the US argued. That ultimately turned TikTok into “an espionage tool” for the Chinese Communist Party.

There’s no telling yet if Trump’s plan can set up a better version of Project Texas or convince China to sign off on a TikTok sale. Analysts have suggested that China may agree to a TikTok sale if Trump backs down on tariff threats.

ByteDance did not respond to Ars’ request for comment.