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Google Eyes Major Investment in AI Startup Character.AI

Google Eyes Major Investment in AI Startup Character.AI

In a move that underscores the burgeoning interest in artificial intelligence (AI) across the tech industry, Alphabet Inc., Google’s parent company, is reportedly in advanced discussions to invest significantly in Character.AI, a chatbot startup founded by former Google employees Noam Shazeer and Daniel De Freitas.

Character.AI, established just last year, has rapidly gained attention for its innovative approach to AI chatbots. 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 platform is free to use, a subscription model is available for $9.99 per month, granting users immediate access to chatbots without waiting in a virtual queue.

The investment, as reported by Reuters, could be in the “hundreds of millions of dollars” range. This marks a deepening of the existing partnership between Google and Character.AI, which already utilizes Google’s cloud services and Tensor Processing Units (TPUs) for its model training.

Data from Similarweb indicates that Character.AI’s chatbots are particularly popular among users aged 18 to 24, who account for about 60% of its website traffic. This demographic has been instrumental in positioning the company as a leading provider of enjoyable personal AI companions. In just six months post-launch, Character.AI announced a milestone of 100 million monthly visits.

Character.AI is not only in discussions with Google but is also exploring equity funding opportunities with venture capital investors. These efforts could potentially value the company at over $5 billion. In March, the startup raised $150 million in a funding round led by Andreessen Horowitz, valuing it at $1 billion.

This potential investment by Alphabet is part of a wider trend in the tech industry, where major cloud service providers are seeking partnerships with AI companies. These collaborations are aimed at encouraging the use of specific cloud or hardware services in the competitive field of AI model development.

Apart from Character.AI, Google has shown a keen interest in other AI startups. It recently invested $2 billion in Anthropic, a model maker, in the form of convertible notes. Anthropic also relies on Google’s cloud services and its latest TPUs.

The U.S. Federal Trade Commission, led by chair Lina Khan, is closely monitoring these investments. The agency is particularly interested in examining any anti-competitive behaviors that might arise from such substantial investments by cloud service providers in AI startups.

Google’s potential investment in Character.AI is a testament to the tech giant’s commitment to advancing AI technology. With its focus on creating engaging and interactive AI chatbots, Character.AI stands out in the AI space, attracting both users and investors alike. This move by Google not only strengthens its position in the AI market but also signifies the growing importance of AI in the tech world.

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