Google in talks for a major investment in AI start-up Character.AI

Alphabet's Google is reportedly in discussions to invest hundreds of millions of dollars in Character.AI, the rapidly growing AI chatbot start-up, as per a Reuters report. The move comes as Character.AI seeks capital to train models and meet the increasing demand from users, according to sources familiar with the matter.

The potential investment, which might take the form of convertible notes, would further solidify the existing partnership between Character.AI and Google. Currently, Character.AI utilizes Google's cloud services and Tensor Processing Units (TPUs) for model training.

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Google and Character AI did not respond to queries. Sources further told Reuters that discussions with Google are ongoing, and the terms of the deal may undergo changes.

More about Character.AI

Founded by former Google employees Noam Shazeer and Daniel De Freitas, Character.AI enables users to interact with virtual versions of celebrities and create their own chatbots and AI assistants. While the platform is free, it offers a subscription model priced at $9.99 per month for users wanting expedited access to chatbots.

Character.AI's chatbots, offering various roles and tones, attract users primarily aged 18 to 24, constituting around 60% of the website's traffic, as per Similarweb data. This demographic positioning aims to differentiate the platform as a provider of entertaining personal AI companions compared to competitors like OpenAI's ChatGPT and Google's Bard.

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Apart from discussions with Google, Character.AI is also in talks with venture capital investors for equity funding, potentially valuing the company at over $5 billion. In March, the company secured $150 million in a funding round led by Andreessen Horowitz at a $1 billion valuation.

The ongoing talks with Google coincide with a broader trend, where major tech cloud service providers forge alliances with AI startups. The U.S. Federal Trade Commission (FTC) is reportedly examining such investments for potential anti-competitive behavior. Google's previous investments include $2 billion in convertible notes for model maker Anthropic.