Apple wants to buy startups. Here's what Tim Cook should have on his shopping list, according to bankers, VCs, and analysts.

In a surprising move, Apple CEO Tim Cook recently revealed the company's intent to explore mergers and acquisitions, stirring speculation among industry experts. During an earnings call, Cook stated, "We're very open to M&A that accelerates our road map," indicating that Apple is actively seeking opportunities to enhance its business strategy. With Apple’s stock experiencing a downturn of approximately 10% this year, concerns about the tech giant's position in the rapidly evolving AI landscape have intensified. Gil Luria, a technology research head at DA Davidson, noted the mounting pressure on Apple’s leadership to take decisive action. "The leadership team is acknowledging the need for change, whether through increased investment or acquisition," Luria explained. Armed with around $133 billion in cash reserves, Apple has the financial capacity to make significant purchases, although it has historically been conservative in its spending. Cook hinted that this strategy might shift, stating, "We are not stuck on a certain size company," suggesting a readiness to consider various acquisition sizes. This year alone, Apple has acquired seven smaller firms from diverse sectors, with the last major acquisition dating back to 2014 when it purchased Beats Electronics for $3 billion. Industry insiders are now speculating about which AI companies might be prime targets for Apple. One anonymous banker pointed to startups specializing in AI-driven media creation, such as Runway AI, Eleven Labs, and Pika AI, as potential fits for Apple’s focus on enhancing consumer experiences. However, not all AI startups align with Apple’s vision; for instance, companies like Anthropic and Cohere cater primarily to enterprise users. The banker highlighted that OpenAI, a frontrunner in the AI field and a popular choice on Apple’s App Store, would have been an ideal acquisition, although its soaring valuation may have made such a deal impractical. As regulatory scrutiny increases, Luria noted that substantial mergers and acquisitions are becoming increasingly challenging for tech giants. He suggested that partnerships and investments, like Meta's involvement with Scale AI, could be a more viable route for Apple. So, what should be on Apple's wishlist? Industry experts have proposed AI-powered search engines and companies focused on healthcare administration as promising options for acquisition. Each recommendation comes with its own set of pros and cons, reflecting the complex landscape that Apple must navigate as it seeks to bolster its position in the technology sector.