Big tech companies are investing money in artificial intelligence startups, which could help them avoid competition law concerns

Another week and another round of crazy cash injections and valuations from the world of artificial intelligence.

DeepL, an AI language translation startup, raised $300 million at a $2 billion valuation; Scale AI, a data labeling platform for machine learning models, secured $1 billion as its valuation almost doubled to $13.8 billion; and H, a fledgling French startup working on its own pioneering models, raised a staggering $220 million seed round at an undisclosed valuation (though it certainly puts H into unicorn territory).

While all the usual institutional investors like Accel, Index, and Y Combinator (YC) are present, these investments really highlight the corporate push to get in on the action while keeping regulators at bay.

Quasi-fusion

Take for example Scale AI, a company that has so far attracted purely institutional investors and business angels from its inception in 2016 until its Series E round in 2021. Similar investors returned to Series F, but Meta, Amazon, Nvidia also followed and VC arms of Intel, AMD, Cisco and ServiceNow.

On the same day that Scale AI announced its powerful Series F investors, H showed its hand: Amazon also bought the company, along with Samsung’s VC arm and UiPath, an automation software company worth $10 billion today.

Corporate investment in artificial intelligence startups has been a big story over the past few years, best exemplified by Microsoft’s close ties with ChatGPT developer OpenAI. The deal has sparked interest from antitrust regulators in the European Union and the United Kingdom amid growing concerns that Big Tech will adopt new “quasi-merger” tactics that seek to control and influence emerging technologies without buying them outright – it could happen by, for example, hiring startup founding teams or strategic investments.

Microsoft is said to own a 49% stake in OpenAI, which means there may be a question that needs to be answered once initial investigations by European regulators are completed – whether Microsoft has voting power in OpenAI or not.

Anthropic may find itself in a similar situation. The three-year-old company has raised over $7 billion from numerous investors, with contributions from corporations such as Google, SAP, and Salesforce and Zoom. But Amazon in particular is responsible for more than half of Anthropic’s fundraising to date, completing a $4 billion investment in March. Although the investment did not give Amazon a majority stake (as did Microsoft in the case of OpenAI), the British antitrust watchdog CMA confirmed last month that it was considering the deal to determine whether it qualifies for an antitrust investigation.

At the same time, the CMA also revealed that it was considering Microsoft’s recent acquisition of Inflection AI (a year after Microsoft became Inflection’s largest backer), which resulted in Microsoft poaching founders and key collaborators to run a new consumer AI unit, leaving Inflection’s core AI focused on the enterprise segment.

The CMA also confirmed it was investigating Microsoft’s recent $16 million investment in French artificial intelligence startup Mistral. However, the regulator quickly concluded that the transaction did not qualify for review due to its relative size.

“The CMA considered the information provided by Microsoft and Mistral AI together with the feedback received in response to the call for comment,” a CMA spokesman said at the time. “On the evidence, the CMA does not consider that Microsoft obtained material influence over Mistral AI as a result of the partnership and is therefore ineligible to open an investigation.”

While Nvidia hasn’t historically been pushed into the same “Big Tech” bracket as the above-mentioned companies, it has become one of the major players in the AI ​​gold rush, and its clout cannot be overstated: the company was valued at this time last year amounted to a considerable USD 770 billion, but in recent months this number has increased to over USD 2.5 trillion. This makes Nvidia the third most valuable company in the world, behind Microsoft ($3.17 trillion) and Apple ($2.87 trillion), but ahead of Meta ($1.18 trillion), Amazon ($1.88 trillion) and Alphabet ($2.15 trillion).

Nvidia has invested in AI startup Hugging Face, alongside Amazon, Google, Qualcomm, Intel and others. Elsewhere, Nvidia has bought shares in Cohere, Perplexity AI, Inflection AI, Cohesity, Mistral AI, Weka, Wayve and many other AI startups.

Big Tech shows no signs of softening its ethos of investing in AI startups in the hope that buying smaller equity stakes may just give them a regulatory pass. That doesn’t mean, however, that the behemoths of Silicon Valley and Seattle won’t be able to exert some form of control over these companies – after all, they are stakeholders and can influence startups in a variety of ways, both subtle and not-so-subtle. ways.