Tech Giants Rush to Invest Billions in AI Startups

Tech giants are pouring unprecedented sums into artificial intelligence (AI) startups, and experts are suggesting these moves are being driven by fear of missing out (FOMO) on AI's potential.

Amazon's (NASDAQ:AMZN) recent US$2.75 billion investment in AI startup Anthropic is its largest venture deal ever, but it's not the only company to jump headfirst into the space. Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META) and others are investing heavily in AI technology, as is NVIDIA (NASDAQ:NVDA).

"They definitely don’t want to miss out on being part of the AI ecosystem," Fred Havemeyer, head of US AI and software research at Macquarie, told CNBC. "I definitely think that there’s FOMO in this marketplace."

In total, investors put US$29.1 billion into nearly 700 generative AI deals in 2023, a 260 percent increase from the previous year, states the publication. A "significant chunk" reportedly came from tech companies.

These large amounts of money are needed because of how costly it is to build and train AI models. To operate they need specialized chips, which are currently provided largely by NVIDIA.

NVIDIA recently made waves at its GPU Technology Conference with a slew of announcements. Among other innovations it introduced the Blackwell architecture, a groundbreaking AI chip aimed at leading the "new industrial revolution."

Powered by the world's first multi-die chip specifically tailored for AI applications, Blackwell promises enhanced processing power for training bigger and more complex AI models.

Aside from NVIDIA, Microsoft has committed substantial resources to AI development, with investments in OpenAI totaling around US$13 billion. For its part, Google (NASDAQ:GOOGL) is doubling down on internal AI development efforts, rebranding its AI model as Gemini and integrating AI features across its product suite.

However, the allure of AI investments has not escaped regulatory scrutiny.

A US Federal Trade Commission inquiry into AI investments reveals growing concerns about the concentration of power among tech behemoths and its potential implications for market competition and innovation.

Even so, the influx of investments into AI startups signals a collective acknowledgment within the tech industry of AI's transformative potential. As companies vie for supremacy in the AI space, fueled by FOMO and a strategic vision of the future, the race to invest billions in AI startups is set to continue.

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.