Discover Google's Interest in Character.AI to Meet Rising User Demand

In a bid to secure additional capital for model training and address the surging demand from users, Alphabet's Google is reportedly in discussions to invest hundreds of millions of dollars in the rapidly expanding artificial intelligence chatbot startup, Character.AI.

Sources familiar with the matter informed Reuters about the ongoing talks, emphasizing that the potential investment may take the form of convertible notes, reflecting Google's interest in Character.AI.

This investment, if materialized, would further strengthen the existing collaboration between Google and Character.AI.

The startup currently utilizes Google's cloud services and Tensor Processing Units (TPUs) for model training.

Despite repeated requests, both Google and Character.AI have refrained from providing official comments on the matter.

Character.AI, co-founded by former Google employees Noam Shazeer and Daniel De Freitas, offers users the opportunity to engage in conversations with virtual versions of celebrities such as Billie Eilish or anime characters.

The platform allows users to create their own chatbots and AI assistants. While the service is free to use, there is a subscription model priced at $9.99 per month, offering users the perk of bypassing virtual queues to access a chatbot.

Popular among users aged 18 to 24, who contribute approximately 60% of the website's traffic, Character.AI aims to position itself as a provider of entertaining personal AI companions, distinguishing itself from competitors like OpenAI's ChatGPT and Google's Bard.

Unlocking the Next Chapter Through Google's Interest in Character.AI

The company has reported attracting 100 million monthly visits to its website in the first six months since its launch.

In addition to the potential investment from Google, Character.AI is reportedly in discussions with venture capital investors for equity funding, with a valuation that could exceed $5 billion.

In March, the startup secured $150 million in a funding round led by Andreessen Horowitz, valuing the company at $1 billion.

The ongoing talks with Google are subject to change, and insiders, who wished to remain anonymous due to the private nature of the discussions, cautioned that the deal's terms are still in flux.

Google's interest in Character.AI aligns with the tech giant's broader strategy of investing in AI startups. Earlier, Google committed $2 billion to model maker Anthropic through convertible notes, in addition to its previous equity investment. Anthropic, like Character.AI, relies on Google's cloud services and the latest TPUs.

This trend reflects a larger pattern in the tech industry, where major cloud service providers forge partnerships with AI companies to encourage the use of specific cloud or hardware solutions.

Microsoft's investments in OpenAI and Google and Amazon's support for Anthropic are examples of this trend.

The U.S. Federal Trade Commission, led by Chair Lina Khan, has recently expressed scrutiny over cloud providers' investments in AI startups, citing concerns about potential anti-competitive behavior.

Khan disclosed this information at an event in San Francisco last week, highlighting the regulatory attention on the evolving intersection of cloud services and artificial intelligence.

Krystal Hu / Reuters