Big Tech’s AI Startup Investment Spree: A “Quasi-Merger” Strategy?
The AI landscape witnessed another week of substantial investments and skyrocketing valuations. DeepL, an AI language translation startup, secured $300 million at a $2 billion valuation. Scale AI, a data-labeling platform for machine learning models, raised $1 billion, nearly doubling its valuation to $13.8 billion. H, a fledgling French startup developing frontier models, garnered an impressive $220 million seed round at an undisclosed valuation, potentially catapulting it into unicorn territory.
While traditional institutional investors like Accel, Index, and Y Combinator participated, these investments highlight a corporate scramble to enter the AI arena while navigating regulatory concerns. Scale AI‘s Series F round saw participation from Meta, Amazon, Nvidia, and the VC arms of Intel, AMD, Cisco, and ServiceNow, alongside existing investors. H also attracted Amazon, Samsung’s VC arm, and UiPath.
This corporate investment trend in AI startups, exemplified by Microsoft’s close ties with ChatGPT-maker OpenAI, has drawn scrutiny from antitrust regulators in the European Union and the U.K. Concerns center on a potential “quasi-merger” tactic, where Big Tech seeks control and influence over emerging technologies without outright acquisition, possibly through hiring founding teams or strategic investments.
Microsoft’s 49% stake in OpenAI could face scrutiny once European regulators conclude their investigations. Anthropic, backed by Google, SAP, Salesforce, and Zoom, received over half its funding from Amazon, prompting the U.K.’s CMA to examine the deal for potential antitrust investigation.
The CMA also investigated Microsoft’s acqui-hire of Inflection AI, where Microsoft absorbed key personnel to lead a new consumer AI unit, and its $16 million investment in French AI startup Mistral, although the latter was deemed not to qualify for investigation due to its size.
Nvidia, a major player in the AI landscape, has seen its valuation soar to over $2.5 trillion, becoming the third most valuable company globally. Nvidia has invested in AI startups like Hugging Face, Cohere, Perplexity AI, Inflection AI, Cohesity, Mistral AI, and others.
Big Tech’s investment in AI startups continues, aiming to secure smaller equity stakes that might avoid regulatory scrutiny. However, these stakeholders can still exert influence over the startups in various ways.
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