AI-connected M&A is coming
The AI strategy issue dominates C-suites and board rooms globally
Due to AI’s revolutionary potential and fear of disruption, many major companies will pursue strategic acquisitions to boost their AI capabilities in the next months and years.
The latest trend started this summer when Databricks purchased MosaicML for $1.3 billion and Thomson Reuters bought Casetext for $650 million.
Fun game: what huge AI-related M&A deals will make headlines next?
These hypothetical transactions may not happen. Lina Khan’s FTC intends to dispute tech M&A, raising antitrust worries.
However, considering whether AI blockbuster acquisitions are strategic and lucrative is informative and intriguing.
These 10 transactions are intriguing
1.Microsoft acquires Hugging Face
As the “GitHub of AI,” Hugging Face An apt parallel. Developers may share and analyse code, AI models, and datasets on GitHub and Hugging Face.
Microsoft’s 2018 $7.5 billion purchase of GitHub enhanced its developer community, making it an open-source ecosystem leader, improved its cloud computing business, and provided several integration options.
Five years from now, Microsoft may buy Hugging Face and merge it with GitHub to become the leading open-source development platform.
Interesting side note: Microsoft is extremely tied to OpenAI, but after months of partnership fissures, Microsoft is looking to lessen its dependence on OpenAI. Acquiring Hugging Face may make Microsoft a neutral platform for closed- and open-source AI providers and models.
2.Meta buys Character.ai
Character.ai may change social media using generative AI. App usage and growth are astonishing, particularly among 18-to-24-year-olds.
Meta/Facebook openly copies or buys social media rivals.
This film has been shown multiple times in 20 years. Meta/Facebook has long replicated Twitter, Snapchat, and TikTok product ideas. Besides its failed $3 billion Snapchat deal in 2013, it paid $1 billion for Instagram in 2012 and $19 billion for WhatsApp in 2014.
The initial phase of Meta’s chatbot proposal last week matches Character.ai’s.
Meta may buy Character.ai if its meteoric rise continues in the coming months to fight competition. The 2023 antitrust cloud over big tech makes this merger as unlikely as any on our list.
3.Snowflake buys Pinecone
Large new technical platforms may need new databases. Because new digital platforms bring new data flows, structures, and modalities.
This occurred with cloud computing a decade ago. Databricks and Snowflake won with cloud-optimized databases.
Vector databases follow AI as the next hot database architecture. Vector databases provide vector embeddings, AI models’ core data structure.
Pinecone, which grew from $30 million in 2021 to $750 million in 2023, had the quickest vector database usage and revenue growth.
Snowflake is the incumbent $50 billion public company. Snowflake may acquire a vector database to keep ahead in this fast-growing industry.
4.Nvidia acquires CoreWeave
Amazon Web Services, Microsoft Azure, and Google Cloud Platform Nvidia’s top customers are competing. Amazon, Microsoft, and Alphabet create AI processors.
With cloud providers pushing down the technological stack to the silicon layer to grab more revenue, what if Nvidia built its own data centres and cloud services to lessen its distribution dependency on cloud companies?
Nvidia’s new cloud service, DGX Cloud, is investigating this. This strategy would be radically extended by purchasing AI-focused cloud company CoreWeave.
Due of the AI boom, CoreWeave’s revenues have risen from $25 million last year to $500 million this year to $2.3 billion in 2024. CoreWeave has grown significantly thanks to Nvidia’s investment and processor access. Vertical integration may follow.
5.Intel acquires Modular
Nvidia’s AI chips excel due to software and hardware. The world’s most powerful parallel computing software environment, CUDA, requires Nvidia GPU hardware.
A well-funded firm created by legendary Silicon Valley engineer Chris Lattner, Modular hopes to be a “CUDA killer” by reinventing AI software architecture for hardware platforms and software frameworks.
Modular may be bought by Nvidia to protect its lucrative CUDA ecosystem. Intel is a more appealing buyer. As they say, my enemy’s enemy is my friend.
Nvidia has eclipsed Intel as the leading chipmaker due to AI. Intel purchased Habana Labs for $2 billion in 2019 to catch up in AI. By delivering a more open and flexible alternative to CUDA, Modular, Intel’s biggest AI project, may help Nvidia lose market share.
Modular supports GPUs and Intel’s major CPUs.
6.Adobe acquires Runway
Adobe dominates creative and design software. Runway’s AI-first creative work platform wants to change the industry.
Adobe quickly adopted generative AI, developing Firefly and adding it to Photoshop and Illustrator. In the last seven months, Firefly users took about 2 billion images.
Adobe needn’t buy Midjourney, Ideogram, or Pika Labs following Firefly’s success.
Runway goes beyond generative models. To redefine creativity, the company provides several AI-powered visual design tools. Runway is utilised by creative professionals, corporations, and Hollywood studios, whereas the previous businesses service consumers.
After this, Adobe may buy Runway.
7.Amazon acquires Anthropic
Last Monday, Amazon stated it will invest $4 billion in Anthropic, making this arrangement obligatory. Investments may lead to full purchases.
Microsoft gets OpenAI, Amazon gets Anthropic. OpenAI offshoot Anthropic is a major AI research group. Amazon may unleash billions of dollars in value by using Anthropic’s cutting-edge large language models (LLMs) throughout its huge business empire, from e-commerce to cloud services to logistics, like Microsoft with OpenAI.
8.Eli Lilly acquires Inceptive
AI will transform biology. Few AI applications will impact humans more.
A few companies are pioneering this trend by combining LLM and generative AI to understand biological processes and develop new drugs for human health.
This firm Inceptive is intriguing. After acquiring $100 million from Andreessen Horowitz and Nvidia, Inceptive is researching AI-based RNA treatments. Lead by Jakob Uszkoreit, co-inventor of the transformer architecture that sparked the AI revolution, Inceptive has top computational and life sciences experts.
Big pharma companies have long examined AI’s impact on drug development. Roche with Recursion, Bayer with Exscientia, Bristol Myers Squibb with insitro—they have cooperated with computational biology businesses rather than acquired them. A pharma company may buy Inceptive to get its experience and technology as AI capabilities and buzz rise.
Most likely significant pharma mover?
Eli Lilly is a fantastic candidate for a massive acquisition due to its dedication to RNA as a revolutionary therapy modality, recent AI investments, and status as the world’s largest pharma company.
9.Salesforce acquires Gong
Salesforce is a recent AI enthusiast. It created a $500 million generative AI corporate venture fund. Mark Benioff of Salesforce promotes AI’s importance.
Salesforce has acquired big companies including Slack, Tableau, and Mulesoft.
Salesforce works nicely with Gong, which analyses sales conversations using machine learning. The items’ synergy are clear.
Gong is larger and older than the imagined acquirees. Salesforce’s $200 billion market worth could withstand $7.25 billion Gong, a tough acquisition target.
Gong was valued at $7+ billion at the peak of 2021’s optimistic zero-interest-rate market, and its product stack leverages older AI. The company may accept an acquisition offer to cash out and avoid a downturn or sales decline.
10.Apple acquires Inflection AI
Apple has less top-tier LLM talent than Alphabet, Meta, Microsoft (OpenAI), and Amazon (Anthropic).
Inflection AI, helmed by DeepMind cofounder Mustafa Suleyman, is 18 months old and possesses research skills few businesses can match.
Apple’s Siri, which missed the LLM boat, might be replaced by Inflection’s chatbot Pi. Similar to Apple, Inflection is sleek and attractive.
Inflection thinks the new company is computer-obsessed. The business raised $1.3 billion this summer to build the largest GPU cluster. Together with Apple, the world’s wealthiest company with over $165 billion in cash, Inflection could employ all the computing it could envision to build its next-generation models.
