Another week has passed, and another incredible infusion of capital and valuation has come out of the AI space.
AI language translation startup DeepL raised $300 million at a $2 billion valuation. Scale AI, a data labeling platform for machine learning models, secured $1 billion at a nearly doubled valuation to $13.8 billion. And H, a French startup working on its own cutting-edge models, raised a staggering $220 million seed round at an undisclosed valuation (though H is definitely comfortably in unicorn territory).
All the usual institutional investors are on board, including Accel, Index and Y Combinator (YC), and these investments are a clear indication that companies are looking to get in on the action while keeping regulators at bay.
Quasi-merger
Take Scale AI, for example: The company has attracted purely institutional and angel investors from its founding in 2016 through its Series E round in 2021. The same investors returned for Series F, but were joined by Meta, Amazon, Nvidia, and the VC arms of Intel, AMD, Cisco, and ServiceNow.
H also revealed his hand on the same day that Scale AI announced its mega-investors for Series F: Amazon had invested, along with Samsung's venture capital arm and UiPath, the automation software company now valued at $10 billion.
Corporate investments in AI startups have been a hot topic in recent years, with Microsoft's close ties with ChatGPT maker OpenAI being a prime example. The deal has come under scrutiny from antitrust regulators in the European Union and the UK due to growing concerns that large tech companies are adopting new “quasi-merger” tactics to seek control and influence over emerging technologies without outright acquiring them. This tactic could be employed, for example, by hiring the startup's founding team or making a strategic investment.
Microsoft reportedly owns 49% of OpenAI, meaning that whether or not Microsoft has voting power in OpenAI may have to provide answers once European regulators complete their initial investigations.
Anthropik could find itself in a similar position. The three-year-old company has raised more than $7 billion from a host of investors, including Google, SAP, Salesforce and Zoom's venture arm. But Amazon specifically has made up more than half of Anthropik's funding to date, closing on a $4 billion investment in March. While Amazon's investment doesn't give it a majority stake (as with Microsoft's deal with OpenAI), the U.K. antitrust regulator, the CMA, confirmed last month that it was looking into the deal to see if it was subject to an antitrust investigation.
At the same time, the CMA revealed it was also investigating Microsoft's recent acquisition of Inflection AI (a year after Microsoft became Inflection's largest backer), which saw Microsoft bring in the company's founders and key colleagues to run a new consumer AI division, leaving Inflection AI with only bare-bones features, with a focus on the enterprise sector.
The CMA also confirmed it was investigating Microsoft's recent $16 million investment in French AI startup Mistral, though the regulator quickly concluded that the deal's relative size meant it was not subject to an investigation.
“The CMA has considered the information submitted by Microsoft and Mistral AI, and the feedback it received in response to its requests for comment,” a CMA spokesperson said at the time. “Based on the evidence, the CMA does not consider that Microsoft has gained significant influence over Mistral AI as a result of the collaboration and therefore is not the subject of an investigation.”
While Nvidia hasn't traditionally been pigeonholed into the same “big tech” category as the aforementioned companies, it has emerged as one of the major players in the AI gold rush, and its influence cannot be overstated. This time last year, the company was valued at $770 billion, no small amount, but that figure has ballooned to more than $2.5 trillion in a matter of months. 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, along with Amazon, Google, Qualcomm, Intel, and others, and has taken stakes in a number of other AI startups, including Cohere, Perplexity AI, Inflection AI, Cohesity, Mistral AI, Weka, and Wayve.
Big tech companies show no signs of slowing down their investments in AI startups, hoping that taking a small stake might help them avoid regulations. But that doesn't mean that Silicon Valley and Seattle giants don't exert some kind of control over these companies. After all, they are stakeholders and can influence startups in all sorts of subtle and not-so-subtle ways.