Big Tech Continues Betting on AI Startups, Social Media and Publishers Could Reap Data Licensing Windfall

Dealmaking and fundraising at privately-held AI startups is booming. Microsoft announced yesterday that it would be adding a small stake in Mistral AI, which will soon launch its commercial language models on Azure. The Mistral position will complement its much larger investment in machine learning behemoth OpenAI. In China, Alibaba has just led the country’s largest single AI funding round. Alibaba claims that its cloud unit now hosts half of China’s generative AI firms.

Data will be an extremely valuable commodity fueling large language (LLM) models in years to come, which could incur significant licensing fees. Reddit recently struck a deal with Google worth $60 million per year that will allow the search engine giant to access a trove of data contained within Reddit’s forum posts. After being sued by the New York Times late last year for copyright infringement, OpenAI reportedly began negotiating licensing agreements with several news outlets to avoid potential litigation in the future.

Related ETF: Roundhill Generative AI & Technology ETF (CHAT)

Microsoft announced a new deal with French startup Mistral AI yesterday, broadening its foray into artificial intelligence (AI) assets. Though the $16.3 million partnership with Mistral (which will convert into an equity stake in Mistral’s next funding round, is just a fraction of the $13 billion Microsoft has plowed into OpenAI, it is also taking a much smaller stake at less than 1.0% if the current $2 billion valuation holds into its next fundraising effort. Like OpenAI’s GPT-4, Mistral’s commercial language models – including the newly-launched flagship Mistral Large model – will be available on Microsoft’s Azure AI platform. Bloomberg reports that OpenAI’s current private market valuation could be as high as $86 billion, while the latest round of Mistral funding has valued the company at roughly $2 billion.

However, just hours after the deal was announced, the European Commission told Reuters that it would analyze the Microsoft-Mistral deal as part of its ongoing scrutiny of big tech’s AI partnerships. Microsoft’s deal with OpenAI has also been subject to regulatory scrutiny in Europe, as well as North America. The US Federal Trade Commission (FTC) said late last month that it would be conducting an extensive study on big tech’s capture of significant AI resources. Several of the companies named explicitly in this probe include Amazon, Alphabet, and Microsoft. Both Amazon and Google have made multi-billion Dollar investments into Anthropic – a startup valued around $15 billion, according to the New York Times. Microsoft has previously…