Google Acquires Character AI’s Technology and Talent in Latest AI Acquisition Spree
San Francisco, CA – In a move that further consolidates Google’s dominance in the artificial intelligence (AI) landscape, the tech giant has announced a strategic partnership with the popular chatbot platform, Character AI. While not a traditionalacquisition, Google will be licensing Character AI’s models and hiring its co-founders and a significant portion of its research team. This deal comes amid a flurryof AI acquisitions by major tech companies, signaling a fierce race to secure the best talent and technology in the burgeoning field.
The partnership will see Character AI’s co-founders, Noam Shazeer and Daniel De Freitas, returnto Google, where they previously worked before founding the company in 2021. They left Google due to frustrations with the company’s bureaucracy, but their return signals a shift in their perspective, likely driven by the immense resources andpotential offered by Google’s AI division.
Character AI, known for its conversational AI models that allow users to interact with personalized chatbots based on real or fictional characters, has been struggling financially in recent months. The company has been forced to cut costs and was actively seeking a buyer, having engaged in discussions withMeta Platforms and Elon Musk’s xAI.
The deal with Google offers a lifeline for Character AI, providing a much-needed financial boost and access to Google’s vast resources. Character AI’s investors will receive a significant return on their investment, with their shares being acquired at a valuation of approximately $88 per share, a 2.5x increase from their Series A funding round in 2023.
However, the deal is not without its controversies. The move has raised concerns among antitrust regulators, with the Federal Trade Commission (FTC) currently investigating Microsoft’s acquisition of Inflection AIto determine if it constitutes a reportable acquisition. While Google’s partnership with Character AI is technically not an acquisition, the FTC is likely to scrutinize the deal, given the increasing consolidation of AI talent and technology within a few major players.
This deal also highlights the growing trend of AI startups being absorbed bylarger tech companies. In the past five months alone, Adept and Inflection have been acquired by Amazon and Microsoft, respectively. While these deals offer lucrative returns for investors, they fall short of the astronomical valuations that venture capitalists had initially hoped for. This trend underscores the reality that the current AI boom is primarily benefitingthe resource-rich tech giants, leaving smaller startups struggling to compete.
Character AI’s technology will be integrated into Google’s Gemini AI project, a multi-modal AI system designed to rival OpenAI’s ChatGPT. Character AI’s expertise in conversational AI and its impressive user base, which boasts over6 million daily active users, will be valuable assets for Google as it seeks to expand its AI capabilities.
Despite the financial benefits, the deal also raises questions about the future of Character AI as an independent entity. The company will be transitioning to using open-source models, such as Meta Platforms’ Llama3.1, for its products, effectively abandoning its own internally developed models. This move suggests a shift in focus away from independent research and development, potentially signaling a loss of autonomy for Character AI.
The future of Character AI remains uncertain. While the company’s technology and talent will be valuable additions toGoogle’s AI arsenal, the deal raises concerns about the increasing consolidation of the AI industry and the potential for stifled innovation. As the AI landscape continues to evolve, the impact of this deal and the broader trend of acquisitions will be closely watched by industry experts and regulators alike.
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