Google, under Alphabet, is negotiating an investment of several hundred million dollars in Character. AI.
The rapidly expanding chatbot startup is seeking capital for model training and to meet increasing user demand, according to information from two sources familiar with the situation, as reported by Reuters.
According to a third source, the potential investment, possibly arranged as convertible notes, will strengthen the current collaboration between Character.AI and Google.
The existing partnership involves utilizing Google's cloud services and Tensor Processing Units (TPUs) for model training.
Google and Character AI did not provide comments when requested.
Character.AI, established by ex-Google staff Noam Shazeer and Daniel De Freitas, enables users to converse with virtual renditions of celebrities such as Billie Eilish or anime characters.
Additionally, users can create their own chatbots and AI assistants.
The platform is accessible for free, but it also offers a subscription model at $9.99 per month, allowing users to bypass the virtual queue for chatbot access.
Character.AI's chatbots, offering diverse roles and tones, have resonated with users aged 18 to 24, comprising approximately 60% of the website traffic, as indicated by Similarweb data.
This demographic is instrumental in establishing the company as a provider of entertaining personal AI companions, distinguishing itself from other AI chatbots such as OpenAI's ChatGPT and Google's Bard.
The company had stated that within the initial six months post-launch, its website garnered 100 million monthly visits.
Character.AI in the process of securing equity:
Character.AI is currently in discussions to secure equity funding from venture capital investors, potentially placing the company's valuation above $5 billion, as per insider information.
The discussions with Google are currently in progress, and the details of the deal are subject to potential changes, according to anonymous sources.
Google has shown a commitment to investing in AI startups, exemplified by a $2 billion investment in model maker Anthropic through convertible notes, in addition to its prior equity investment.
Anthropic utilizes both Google's cloud services and the latest iteration of TPUs.
This aligns with the current pattern where major cloud service providers in the tech industry are forming agreements with AI firms, aiming to encourage their adoption of specific cloud platforms or hardware.
Notable instances include Microsoft's investments in OpenAI, as well as Google and Amazon's support for Anthropic.
Lina Khan, the chair of the U.S. Federal Trade Commission, mentioned during an event in San Francisco last week that the agency is investigating investments by cloud providers in AI startups to scrutinize potential anti-competitive practices.