Big tech companies are busy acquiring AI talent to dominate the market

Alphabet subsidiary Google (which just received some bad news in the form of a court ruling against it over its search engine monopoly) is the latest company to follow in the company’s footsteps, hiring Character.ai co-founders Noam Shazeer and Daniel De Freitas, as well as several other employees.

Most of the startup’s employees will remain with the smaller company, and its general counsel will become CEO. Why a lawyer? Because Google is striking a licensing deal to use Character.AI’s technology—in addition to buying out the startup’s investors, primarily Andreessen Horowitz, who have put in more than $150 million.

Last year, Microsoft hired the founding team of Inflection, a fast-growing startup that was also building an AI companion. Then Amazon.com hired a team at Adept, a San Francisco-based company co-founded by former OpenAI and Google researchers.

It’s a gimmick that’s paying huge dividends for tech giants who can afford the massive computing power and data needed to build Generative AI but struggle to attract top talent. Now they can do the latter.

Shazeer is a big hire for Google, which has been struggling with glitches in its flagship AI model, Gemini, that could hamper its efforts to catch up with Microsoft and Amazon in the cloud wars. Shazeer is so revered that Google could pay him tens of millions of dollars (or more) to return to the company.

He was one of the principal inventors of Transformer, the powerful AI systems project that has underpinned the recent boom. In 2017, he was arguably the most respected Google scientist, named in a groundbreaking research paper that detailed how Transformer could use powerful AI chips to rapidly process and generate information.

Google was slow to embrace the technology, but OpenAI made Transformer the basis for ChatGPT (that’s the “T”). All eight authors of the research paper left Google, mostly to start companies that have raised billions of dollars on their pedigree, including two who co-founded Adept.

When Shazeer co-founded Character.ai, he continued the work that Google had shut down to build realistic chatbots that humans could use as companions. Character.ai became one of the most popular AI apps outside of ChatGPT, especially among teenagers.

The app lets you chat with a bot specially trained to emulate a famous person, fictional or historical figure. Several teens told me they spend hours a day on the app, role-playing or chatting with an artificial confidante.

Shazeer’s goal was to create an AI model that could remember everything about you. “A human has probably heard or read hundreds of billions of words in their life, so that’s about the scale of data you need—a quarter of a gigabyte—to have a lot of context about a person’s life,” Shazeer told me in January.

“It’s not beyond the realm of possibility as we refine our algorithms… The model would know billions of things about you when it talks to you.”

While the vision seems intriguing, Shazeer now plans to take it to his old bosses at Google, where he will likely have more influence than before, perhaps working directly with Google DeepMind CEO Demis Hassabis.

The question is whether companies like Meta or Elon Musk’s X.ai will follow a similar acquisition strategy. Both companies reportedly considered acquiring Character.ai before Shazeer went to Google, but there are other AI companies in the market that are likely struggling with the costs of building their technology in the face of unclear revenue prospects.

The likely candidates include Cohere, a Canadian AI startup founded by another Transformer author, and Perplexity, a San Francisco startup that competes with Google in AI searches.

Even the founders of Anthropic and OpenAI, two AI startups that have raised $8.8 billion and $11.3 billion respectively, are certainly looking toward the exit door.

OpenAI could lose $5 billion this year, according to an analysis by The Information that analyzed the company’s internal financial data, meaning it will need to raise more cash one way or another.

The U.S. Federal Trade Commission is investigating the actions of Microsoft and Amazon, but there is no indication that formal investigations will be launched or deals will be reached.

More likely: We’ll see tech giants gobbling up more GenAI industry leaders, consolidating power as they weather the current market meltdown right under the noses of regulators. Perhaps that’s what AI startups have been expecting. ©bloomberg