Corporate Investment in AI Startups: The Corporate Clamber for Control
In recent years, there has been a surge in corporate investment in AI startups, with major players like Microsoft, Amazon, and Nvidia leading the charge. These investments not only highlight the growing interest in AI technologies but also raise concerns about the tactics employed by Big Tech to gain control and influence over nascent technologies without outright acquisitions.
One example of this trend is Scale AI, a data-labeling platform for machine learning models. While the company had previously attracted institutional and angel investors, its latest funding round saw the entry of corporate giants like Meta, Amazon, Nvidia, and the VC arms of Intel, AMD, Cisco, and ServiceNow. Similarly, French startup H recently raised an impressive $220 million seed round with investments from Amazon, Samsung’s VC arm, and UiPath.
Microsoft’s close affiliation with OpenAI is another case in point. The tech giant holds a 49% stake in OpenAI, leading to scrutiny from antitrust regulators. This quasi-merger approach, where Big Tech exerts control and influence through strategic investments or hiring founding startup teams, has caught the attention of regulators in the European Union and the U.K.
Anthropic, a three-year-old AI company, has also attracted significant corporate investment, particularly from Amazon. While Amazon’s investment hasn’t given them a majority stake in Anthropic, U.K. antitrust regulators are investigating the deal to determine if it warrants an antitrust investigation.
The U.K.’s Competition and Markets Authority (CMA) has been actively monitoring these developments. The CMA is currently investigating Microsoft’s recent acqui-hire of Inflection AI and its investment in French AI startup Mistral. However, the CMA concluded that the Mistral deal didn’t qualify for investigation due to its relative size.
Nvidia, although not traditionally grouped with Big Tech, has become a major player in the AI space. The company’s valuation has skyrocketed, making it the third most valuable company globally. Nvidia has invested in several AI startups, including Hugging Face, Cohere, Perplexity AI, and Inflection AI.
Despite these investments, Big Tech companies are keen to avoid regulatory scrutiny. By procuring smaller equity stakes in AI startups, they hope to bypass antitrust investigations. However, as stakeholders, these tech giants still hold significant influence over these startups, shaping their direction and strategies.
The corporate clamber for control over AI startups is a testament to the immense potential of these technologies. As the AI industry continues to grow, it is crucial for regulators to strike a balance between fostering innovation and preventing anti-competitive practices. The future of AI rests not only on technological advancements but also on how these technologies are governed and controlled.