IT companies aren’t making many acquisitions these days due primarily to an unfavorable regulatory climate. To stay ahead of the generative AI boom, IT companies are investing historically large sums of money in artificial intelligence startups.
This week, Amazon announced its largest venture deal, a $2.75 billion investment in artificial intelligence firm Anthropic, and provided yet another illustration of the AI gold rush that is driving the top internet corporations to open their wallets.
The creator of the AI model Claude, Anthropic, faces off against Google’s Gemini and Microsoft-backed OpenAI’s GPT. In an industry expected to generate over $1 billion in sales in the next ten years, Apple, Meta, and other companies are vying to be the first to include generative AI in their extensive range of features and products.
According to PitchBook, investors invested a total of $29.1 billion in almost 700 generative AI investments in 2023, a 260% increase in value from the previous year.
The fact that a sizable portion of that funding originated from tech businesses rather than venture capitalists or other organizations made it strategically relevant. One of the things that drives their decisions is a fear of losing out, according to Fred Havemeyer, head of U.S. software research and AI at Macquarie.
Havemeyer stated, “They definitely don’t want to miss out on being part of the AI ecosystem. I definitely think that there’s FOMO in this marketplace.”
According to Havemeyer, tech companies are investing in AI startups because these ventures fit with their product roadmaps, so they aren’t merely cashing in on the “hype cycle.” He stated, “I don’t think it’s frivolous.”
Partnerships with large cloud providers help businesses get clients in addition to providing much-needed funding, stated Havemeyer.
“Come to us, work on our platform, have native access to the latest and greatest AI models, and also use our infrastructure,” Havemeyer stated about the cloud businesses’ approach. “It’s also part of a much larger ecosystem play.”
“We’re seeing a lot of alliances appearing among those hyperscalers that have substantial scale, infrastructure and very deep pockets,” he continued.
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