An illuminated Google logo is seen inside an office building in Zurich, Switzerland December 5, 2018. REUTERS/Arnd Wiegmann/File Photo Acquire Licensing Rights
Nov 10 (Reuters) – Alphabet’s ( GOOGL.O ) Google is in talks to invest hundreds of millions of dollars in Character.AI as the fast-growing artificial intelligence chatbot startup seeks capital to train models and keep up with user demand , two sources briefed on the matter told Reuters.
The investment, which a third source said could be structured as convertible notes, will deepen the existing partnership Character.AI already has with Google, where it uses Google’s cloud services and Tensor Processing Units (TPUs) to train models.
Google and Character AI did not respond to requests for comment.
Founded by former Googlers Noam Shazeer and Daniel De Freitas, Character.AI allows people to chat with virtual versions of celebrities like Billie Eilish or anime characters while creating their own chatbots and AI assistants. It’s free to use, but offers a subscription model that charges $9.99 per month for users who want to skip the virtual line to access a chatbot.
Character.AI’s chatbots, with different roles and tones to choose from, have appealed to users aged 18 to 24, who contributed about 60% of their website traffic, according to data from Similarweb. The demographics help the company position itself as the purveyor of more fun personal AI companions compared to other AI chatbots from OpenAI’s ChatGPT and Google’s Bard.
The company previously said its website had attracted 100 million monthly visits in the first six months since launch.
Character.AI is also in talks to raise equity funding from venture capital investors, which could value the company at more than $5 billion, sources said. In March, it raised $150 million in a funding round led by Andreessen Horowitz at a $1 billion valuation.
Talks with Google are ongoing and the terms of the deal could change, said the sources, who requested anonymity because the discussions are private.
Google has invested in AI startups, including $2 billion for model maker Anthropic in the form of convertible notes, on top of its previous equity investment. Anthropic uses Google’s cloud services as well as its latest version of TPUs.
It’s part of a recent trend of big tech cloud service providers striking deals with AI companies to entice them to use particular cloud or hardware in the compute-intensive race to build models and serve consumers, including Microsoft ( MSFT.O ) investments in OpenAI and Google and Amazon’s ( AMZN.O ) bets on Anthropic.
US Federal Trade Commission Chairwoman Lina Khan said at an event in San Francisco last week that the agency is investigating cloud providers’ investments in AI startups to investigate possible anti-competitive behavior.
Reporting by Krystal Hu in New York, additional reporting by Anna Tong and Jeffrey Dastin; Editing by Bill Berkrot
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