Meta (META), xAI Race to Partner with Character.ai; xAI Raises $6B ...
Meta and xAI are competing to partner with AI startup Character.ai. Major tech giants are increasingly investing in and partnering with AI startups. Meta (NASDAQ:META) and xAI, Elon Musk’s artificial intelligence (AI) startup, are competing for a partnership with Character.ai, the Financial Times reported. Character.ai specializes in chatbots that use large language models (LLMs) to emulate various personas.
Partnership Discussions
In a separate development, xAI raised $6 billion in a second round of funding. According to the Financial Times report, Meta had preliminary discussions with Character.ai about collaboration, focusing on pre-training and model development initiatives. Similarly, xAI has also explored the possibility of partnering with Character.ai.
It’s noteworthy that major tech giants are increasingly investing in and partnering with AI startups to enhance their AI capabilities, meet growing demand, and stay competitive. For example, e-commerce and cloud computing giant Amazon (NASDAQ:AMZN) invested $4 billion in AI startup Anthropic. In a similar move, Alphabet’s (NASDAQ:GOOGL) Google also invested in OpenAI-rival firm Anthropic. Further, there were reports that Google is considering a substantial investment in Character.ai. Currently, neither Meta nor xAI have reached a formal agreement with Character.ai.
Technology Developments
xAI, which is also seeking a partnership with Character.ai, has developed Grok, a chatbot available to premium subscribers on X, Musk’s social media platform. xAI plans to build a supercomputer to power the next version of Grok, as reported by The Information.
The AI startup has secured $6 billion in a second round of funding from investors, including Sequoia Capital, Valor Equity Partners, Andreessen Horowitz, Vy Capital, and Fidelity Management & Research Company. The funds will be used to launch its first product, develop advanced infrastructure, and expedite research and development.
Investments and Strategies
Meta is investing aggressively in AI and integrating generative AI capabilities and chatbots into its social media platforms. The company is also exploring other AI partnerships as part of its broader strategy to become a leading AI company. According to the TipRanks Stock Analysis tool, “Bulls Say, Bears Say,” analysts bullish on META stock expect Meta to benefit from AI-driven content, driving higher user engagement and ad revenue. However, Meta is providing its latest and most advanced AI models to the public at no cost, sparking worries about monetization and potential short-term earnings pressure. This has slowed the momentum in its stock, which is up about 82.36% year-to-date.
Market Outlook
Wall Street is upbeat about Meta’s prospects. The stock sports a Strong Buy consensus rating based on 37 Buys, three Holds, and two Sell recommendations. Analysts’ average price target on META stock is $522.95, implying 9.35% upside potential from current levels.
