Big tech invests billions in AI startups

The fear of missing out has sparked a surge in multi-billion-dollar investments in generative AI startups.

This has become increasingly more common as tech giants are acquiring less, so instead, they are using that money to invest in cutting-edge gen AI startups.

Most recently this has been seen with Amazon in the last week, which has invested an additional $2.75 billion into AI startup Anthropic, bringing its total investment into the startup to $4 billion. Amazon’s first investment in Anthropic happened back in September 2023, which amounted $1.25 billion. Amazon’s newest investment total is its largest venture deal to date.

This is a prime example of the AI hype that is compelling the largest tech firms globally to open their wallets and invest.

According to PitchBook, in 2023, investors channelled a total of $29.1 billion into almost 700 generative AI transactions, marking an increase of over 260% in value from the previous year. A considerable portion of this funding was strategic, originating from tech companies instead of venture capitalists or other institutions. According to the Financial Times, in 2023, tech behemoths such as Microsoft, Google, and Amazon notably surpassed VC firms in AI investments, participating in transactions that accounted for two-thirds of the $27 billion raised by AI startups throughout the year.

There is only a limited pool of companies with the financial capability to engage in the market, whether through direct development or investment. Nvidia, while advancing its chip technology, has also positioned itself as one of Silicon Valley’s leading investors by acquiring stakes in several rising AI enterprises. This strategy partly aims to ensure the broad application of its technology. Likewise, Microsoft, Google, and Amazon occasionally extend cloud credits in conjunction with their investments.

Speaking of Nvidia, in 2023, the firm invested in 35 AI companies. To support this initiative, Nvidia has created a specialised venture capital division known as NVentures. This entity, working in tandem with its corporate development team, has compiled a portfolio featuring notable AI entities like Inflection AI and Cohere. Its investment portfolio includes startups such as Hugging Face, a company offering data and tools for AI developers, CoreWeave, a specialist in cloud infrastructure for high-performance computing applications that utilise Nvidia’s graphics processing units (GPUs), and Mistral, a Paris-based AI startup specialising in open-source software for chatbots and generative AI tools.

Some of the other large investment rounds by big tech in 2023 alone include:

  • OpenAI: Microsoft's $13 billion investment in OpenAI set the record for the largest funding round in an AI startup to date, though expectations are high that this figure will be surpassed in their subsequent funding round.
  • Inflection AI: With Microsoft, Nvidia, and others leading the charge, Inflection AI raised $1.3 billion in 2023 alone, bringing the startup's valuation to $4 billion.
  • Databricks: T. Rowe Price Associates spearheaded a $685 million funding round for this data analytics firm, valuing Databricks at $43 billion.
  • Mistral AI: Based in Paris, Mistral AI raised around $487 million in funding at a $2 billion valuation, with significant investments from Andreessen Horowitz, General Catalyst, Lightspeed Venture Partners, Nvidia, and Salesforce.

Tech executives across the board have emphasised their commitment to generative AI, conveying to investors the necessity of allocating funds towards making money, whether that be through internal development or investment in startups. It is rumoured that the heads of Google, Apple, and Amazon have also hinted to investors their willingness to reduce expenses across the board in order to reallocate more funds towards their AI ventures.

In all of this, gen AI startups seem to be where these funds are heading. While some of the big tech firms are developing and working on their own models, such as Google’s Gemini, these large investments in startups are not likely to slow down anytime soon.