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Google plans to invest in AI chatbot startup Character.AI

Alphabet Inc’s Google is reportedly in advanced discussions to invest hundreds of millions of dollars in Character.AI, an emerging artificial intelligence chatbot startup. According to Reuters, this investment could significantly boost Character.AI’s capabilities to meet growing user demand and advance its AI model training.

Deepening an existing partnership

Character.AI already leverages Google’s cloud services and Tensor Processing Units for model training. The potential investment, possibly in the form of convertible notes, is set to strengthen this partnership further. However, both Google and Character.AI have not responded to requests for comment on these discussions.

Founded by ex-Google employees Noam Shazeer and Daniel De Freitas, Character.AI has made a name for itself by allowing users to interact with virtual versions of celebrities and anime characters. Its platform also enables the creation of personalized chatbots and AI assistants. While the service is free, it offers a subscription model at $9.99 a month for priority access to chatbots.

Demographic reach and website traffic

Character.AI has found particular appeal among the 18–24 age group, accounting for about 60% of its website traffic, per Similarweb. This demographic is crucial in positioning the company as a provider of engaging AI companions, differentiating it from competitors like OpenAI’s ChatGPT and Google’s Bard.

In its initial six months post-launch, Character.AI’s website garnered an astounding 100 million monthly visits. The company is also in talks for equity funding from venture capital investors, potentially valuing it at over $5 billion. Earlier in March, it raised $150 million in funding led by Andreessen Horowitz, valuing the company at $1 billion.

Google’s AI investment strategy

Google’s potential investment in Character.AI is part of a broader trend of major tech cloud providers like Microsoft and Amazon making strategic investments in AI companies. These investments often encourage the use of specific cloud services or hardware in the rapidly evolving AI model development and consumer service space.

This trend of tech giants investing in AI startups has not gone unnoticed by regulators. U.S. Federal Trade Commission chair Lina Khan recently noted that the agency is examining these investments for any anti-competitive behaviors.

Source: ReadWriteWeb