Google CEO Sundar Pichai highlights 'AI shift' as key for startup investments

With Alphabet potentially earning $100 billion or more from its 2015 investment in Elon Musk's SpaceX, Google CEO Sundar Pichai stated that the rapid growth of artificial intelligence (AI) has paved the way for increased investments in startups.

"You're familiar with SpaceX, Anthropic, and similar ventures, so with AI's current boom, there's more potential for capital investment that's wise and efficient, and we are committed to pursuing that," Pichai commented in a conversation with Stripe's co-founder John Collison which was shared on Tuesday.

Google has been part of the startup investment arena via its early-stage investment group GV and its growth arm CapitalG. 

However, with the present AI firms needing investments in the range of hundreds of millions or even billions, Google parent company Alphabet is collaborating with other tech giants such as Nvidia, Microsoft, and Amazon to avoid traditional venture capital routes and is opting for significant off-the-balance-sheet investments.

Alphabet's initial investment in SpaceX was in 2015, with $900 million at a valuation of roughly $12 billion. 

In February, SpaceX merged with Musk's xAI in a transaction totaling $1.25 trillion. Presuming Alphabet maintained all its shares, their worth would be around $100 billion currently and might increase soon.

Recently, SpaceX confidentially filed for an IPO, and the company is anticipated to aim for a valuation of $1.75 trillion, potentially setting a record.

Anthropic, a competitor to OpenAI and a rival to Google's AI models, collaborates with the search giant by agreeing to acquire billions in tensor processing units (TPUs) and cloud infrastructure.

In 2023, Google invested $300 million in the AI laboratory for around a 10% share. Later, it committed to another investment of $2 billion. 

Since then, Anthropic's value skyrocketed from single-digit billions to $380 billion as of their latest funding round in February, with Google making further investments.

All in all, Google's investment in Anthropic has now surpassed $3 billion, and it is said to hold a 14% ownership in the company.

Pichai's recent statements hint that Google might be considering new external investments as its AI profits rise. He mentioned that the company aims "to responsibly manage capital."

"If you're confident about ROIC, you'd want to maximize investment returns there," he remarked, referring to return on invested capital.

While talking with Collison about investments, Pichai was expressing his thoughts to a leader of a portfolio company.

Stripe was appraised at $159 billion in February, having increased more than seventeenfold since GV joined a $150 million round in 2016. CapitalG is also backing the fintech firm.

Pichai also discussed Waymo, Alphabet's division for self-driving vehicles. Waymo conducted its first external investment round in 2020, generating $2.25 billion. 

This year, Waymo secured a $16 billion investment round, valuing the company at $126 billion, with Alphabet joining hands alongside several external investors.

When Waymo initially raised capital, Alphabet wasn't able to contribute the funds it can currently.