Before Meta agreed to invest $14.3 billion in Scale AI—a company that provides data labeling and model evaluation services to artificial intelligence firms—it held discussions with Perplexity, a subscription-based AI-powered search engine, regarding a potential investment or acquisition.

According to Bloomberg, the two parties failed to reach an agreement on the terms and valuation. Perplexity was recently valued at $1 billion. Had the deal gone through, it could have significantly strengthened Meta’s position in the AI race, where it is competing aggressively with OpenAI and Microsoft for both market share and top talent.

An acquisition of Perplexity would also likely have drawn increased regulatory scrutiny. Meta is already facing pressure from U.S. regulators over concerns that it holds a near-monopoly in the social media market. Authorities in Washington are currently debating whether to force Meta to divest one of its major platforms, WhatsApp, which it acquired in 2014 for $19 billion.

Since the launch of ChatGPT, Meta CEO Mark Zuckerberg has shifted his focus from the Metaverse to artificial intelligence, pouring billions of dollars into research, infrastructure, and talent acquisition to ensure Meta remains competitive in the evolving AI landscape.