Character.AI-Google Deal Raises Eyebrows Amid Regulatory Scrutiny

Noam Shazeer, co-founder and CEO of Character.AI / aidigitalx

Character.AI has signed a non-exclusive licensing agreement with Google for its large language model technology. The deal involves Character.AI’s co-founders, Noam Shazeer and Daniel De Freitas, rejoining Google, their former employer, along with some other Character.AI employees.

This agreement is similar to recent deals made by Microsoft and Amazon with other AI startups. These deals are attracting regulatory scrutiny due to concerns about how large tech companies are acquiring AI talent and technology.

Character.AI will receive additional funding as part of the deal, though the amount was not disclosed. Most of Character.AI’s staff will remain with the company.

Dominic Perella, previously Character.AI’s general counsel, is becoming the interim CEO of the startup.

Google specifically mentioned welcoming back Noam Shazeer to join Google DeepMind’s research team.

This deal follows a trend of major tech companies investing heavily in AI startups:

Microsoft paid $650 million to acquire talent from Inflection in March.
Amazon hired key personnel from Adept in June.

Character.AI has raised over $150 million in funding, primarily from Andreessen Horowitz (a16z).

Character.AI had previously raised $193 million in venture capital. There were earlier reports of Google being in talks to invest hundreds of millions in Character.AI.

The startup cites changes in the AI landscape, particularly the increased availability of pre-trained models, as a factor in their decision to partner with Google and use third-party LLMs alongside their own.

This deal, like similar recent moves by big tech companies, may face scrutiny from regulatory bodies such as the FTC, DoJ, and EU authorities.