Google is in discussions to invest a significant amount of money in Character.AI, a fast-growing startup specializing in artificial intelligence chatbots. The investment, which may be in the form of convertible notes, will strengthen the existing partnership between Google and Character.AI. The startup currently utilizes Google’s cloud services and Tensor Processing Units (TPUs) for training models. Both Google and Character.AI have declined to comment on the matter.
Character.AI was founded by former Google employees Noam Shazeer and Daniel De Freitas. The platform allows users to interact with virtual versions of celebrities and anime characters, as well as create their own chatbots and AI assistants. While the service is free, there is a subscription option available for $9.99 per month, allowing users to bypass the virtual line and access a chatbot immediately. The majority of Character.AI’s website traffic comes from users aged 18 to 24, positioning the company as a provider of fun and personalized AI companions compared to competitors like OpenAI’s ChatGPT and Google’s Bard. Since its launch, the website has attracted 100 million monthly visits in the first six months.
In addition to discussions with Google, Character.AI is also in talks with venture capital investors to raise equity funding. These discussions could potentially value the company at over $5 billion. In a previous funding round led by Andreessen Horowitz, Character.AI raised $150 million at a valuation of $1 billion. The ongoing discussions with Google are subject to change, and the terms of the deal have not been finalized.
Google has been actively investing in AI startups, including a $2 billion investment in model maker Anthropic through convertible notes. This investment is in addition to Google’s previous equity investment in the company. Anthropic also utilizes Google’s cloud services and the latest version of TPUs. This trend of big tech cloud service providers investing in AI companies is aimed at encouraging the use of specific cloud services or hardware in the competitive race to develop models and serve consumers. Microsoft has made investments in OpenAI, while Google and Amazon have made bets on Anthropic.
The U.S. Federal Trade Commission is currently examining cloud provider investments in AI startups to investigate any potential anti-competitive behaviors. This scrutiny was mentioned by FTC chair Lina Khan during an event in San Francisco.
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