Google said it is in talks to invest in AI chatbot startup

Alphabet’s Google is in talks to invest millions of dollars in Character.AI as the fast-growing artificial intelligence chatbot startup seeks capital to train models and respond to user demand, on the matter Two sources briefed on the matter told Reuters.

The investment, which could be structured as convertible notes, would deepen the existing partnership, according to a third source. Character.AI already has a partnership with Google, in which it uses Google’s cloud services and Tensor Processing Units (TPUs) to train models.

Google and Character AI did not respond to requests for comment.

Founded by former Google employees Noam Shazier and Daniel de Freitas, Character.AI allows people to chat with virtual versions of celebrities like Billie Eilish or anime characters, while creating their own chatbots and AI assistants. It is free to use, but offers a subscription model that charges $9.99 (roughly Rs. 831) per month for users who want to skip the virtual line to access the chatbot.

With a variety of roles and tones to choose from, Character.AI’s chatbots have attracted users aged 18 to 24, accounting for nearly 60 percent of its website traffic, according to data from SimilarWeb. The demographic is helping the company position itself as a purveyor of more fun-loving personal AI companions than other AI chatbots like OpenAI’s ChatGPIT and Google’s Bard.

The company had previously said that its website had 100 million monthly visits in the first six months after launch.

Sources said Character.AI is also in talks to raise equity funding from venture capital investors, which could value the company at more than $5 billion (about Rs 41,605 crore). In March, it raised $150 million (roughly Rs. 1,248 crores) in a funding round led by Andreessen Horowitz at a valuation of $1 billion (roughly Rs. 8,321 crores).

Talks with Google are continuing and the terms of the deal could change, said the sources, who requested anonymity because the discussions are private.

Google has been investing in AI startups, including $2 billion (roughly Rs. 16,642 crores) in the form of convertible notes for model maker Anthropic, on top of its first equity investment. Anthropic uses Google’s cloud services as well as the latest version of TPU.

It’s part of a recent trend in which big tech cloud service providers are striking deals with AI companies to entice them to use some of the cloud or hardware in a computer-intensive race to build models and serve consumers. Which also includes Microsoft’s investment in OpenAI and Google. Amazon’s bet on Anthropic.

US Federal Trade Commission Chairwoman Lina Khan said at an event in San Francisco last week that the agency is looking at cloud provider investments in AI startups to investigate any anti-competitive behavior.

© Thomson Reuters 2023

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