Google Explores Investment in Character.AI for AI Advancements

• Google considers investing millions in AI chatbot startup Character.AI.
• The potential investment strengthens Character.AI’s reliance on Google’s cloud services and TPUs.
• Character.AI eyes a valuation over $5 billion, supplementing a $150 million funding round in March.

The potential investment, rumored to take the form of convertible notes, would deepen the existing collaboration between Character.AI and Google. Character.AI currently utilizes Google’s cloud services and Tensor Processing Units (TPUs) for training its models.

Founded by former Google employees Noam Shazeer and Daniel De Freitas, Character.AI has gained attention for its unique platform, allowing users to engage in virtual conversations with celebrities and customize their own chatbots and AI assistants. While the basic service is free, a subscription model, priced at $9.99 per month, offers users the advantage of bypassing virtual queues to access chatbots promptly.

Character.AI has particularly resonated with users aged 18 to 24, contributing to about 60% of its website traffic, positioning the company as a leading provider of entertaining personal AI companions. This demographic preference sets Character.AI apart from other AI chatbots, such as OpenAI’s ChatGPT and Google’s Bard.

According to Similarweb data, the company reported 100 million monthly visits within the first six months of its launch. In March, Character.AI secured $150 million in a funding round led by Andreessen Horowitz, valuing the startup at $1 billion. Ongoing talks with Google and potential equity funding from venture capital investors could now raise the company’s valuation to over $5 billion.

While both Google and Character.AI declined to comment on the investment discussions, the talks align with Google’s broader strategy of investing in AI startups. This move follows a trend among major tech companies, including Microsoft, Amazon, and Google, striking deals with AI startups to leverage specific cloud services or hardware in the competitive landscape of model development and consumer services.

The U.S. Federal Trade Commission is reportedly keeping a close eye on such investments in AI startups to ensure fair competition, with chair Lina Khan stating that the agency is actively examining potential anti-competitive behaviors in cloud provider investments in the AI sector.

As the talks between Google and Character.AI continue, the terms of the deal remain subject to change, according to sources requesting anonymity due to the private nature of the discussions.

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