Alphabet Inc’s Google is reportedly in discussions to invest in Character.AI, an artificial intelligence (AI) chatbot startup. According to sources familiar with the matter, the investment could be in the range of “hundreds of millions of dollars” in convertible notes and is expected to strengthen the relationship that the Big Tech behemoth already has with the AI company.
Founded by former Google employees Noam Shazeer and Daniel De Freitas, Character.AI is a free AI chatbot app that allows users to interact with virtual versions of their favorite celebrities, and game, or anime characters. It uses neutral language models to participate in contextual conversations and generate text responses.
The platform also enables customers to create personalized chatbots and AI assistants. While Character.AI is free to use, those who want to skip the virtual waiting line to access the AI can sign up for a subscription service that costs $9.99 per month.
Google Set to Expand its Strategic Partnership with Character.AI Through Fresh Investments
Character.AI already has a strategic partnership with Google that has seen it leverage the search giant’s cloud services and Tensor Processing Units (TPU) – an application-specific high-performance chip designed by Google to fasten machine learning workloads – for training its large language models (LLMs).
The platform is widely popular among users aged 18-24, who account for about 60% of its website traffic, per data from Similarweb. The demographic views Character.AI as the purveyor of more fun and personalized AI assistants, compared to the more standard AI chatbots from its competitors like OpenAI’s ChatGPT and Google’s own Bard.
Within just six months of launch, Character.AI was able to garner an astounding 100 million monthly visitors.
The company has also been in talks to raise equity funding from venture capitalists. In March, the AI firm announced that it raised $150 million in a funding round led by tech and crypto VC Andreessen Horowitz at a valuation of $1 billion.
Character.AI’s ongoing discussions with Google could potentially expand their existing partnership and also broaden the Silicon Valley giant’s strategy of investing in AI startups. Anonymous sources say that if the deal with Google goes ahead as planned, then the company would probably aim for a valuation north of $5 billion.
Google, Amazon, and Microsoft in Race to Achieve AI Dominance by Investing in AI Startups
Google’s investment is part of a recent industry trend where big tech players, especially cloud service providers, strike deals with AI startups, allowing those firms to utilize its cloud and hardware resources to bolster their capabilities to develop efficient AI models and provide services that customers demand.
Google recently made a $2 billion investment in convertible notes in AI model maker Anthropic, which came on top of its earlier equity investment in the startup. Similar to Character.AI, Anthropic uses Google’s cloud services as well as the latest version of the TPUs to train its machine learning algorithms.
In September, Amazon announced that it will be investing up to $4 billion in Anthropic to strengthen its strategic collaboration in building next-generation AI technology. While the startup already makes use of Google’s cloud services, it selected Amazon Web Services as its primary cloud provider.
Meanwhile, Microsoft has invested more than $10 billion in OpenAI since its founding in 2019. The tech titan owns 49% of Sam Altman’s company, becoming its “exclusive” cloud computing services provider. Microsoft, together with the ChatGPT creator, will jointly develop new technologies for the Azure platform, further expand OpenAI’s large-scale AI capabilities, and gain an edge on the most popular and advanced AI systems.
However, the growing trend has come to the attention of federal regulators. While speaking at an event held in San Francisco, US Federal Trade Commission chair Lina Khan said that the agency was looking into cloud provider investments in AI startups for any anti-competitive behaviors.