The New A.I. Deal: Buy Everything but the Company

Google, Microsoft, and Amazon have recently opted for complex licensing deals rather than outright acquisitions of AI start-ups. This shift is exemplified by Google's recent agreement with Character.AI, where it will pay $3 billion to license technology and hire key employees, while the start-up continues to operate independently. This approach allows tech giants to acquire essential technology and talent without facing regulatory scrutiny associated with traditional acquisitions. The trend began with Microsoft’s $650 million deal with Inflection and has continued with Amazon's similar arrangement with Adept. These deals are seen as a way for large companies to sidestep antitrust concerns while still gaining competitive advantages in the AI sector. However, this strategy has left some start-ups with diminished resources and leadership, raising concerns among investors about the long-term viability of these orphaned companies. Critics argue that such arrangements could undermine the incentives for founders and employees, potentially harming the innovation ecosystem in Silicon Valley. As the AI landscape evolves, more of these unconventional deals are expected, driven by the need for large firms to secure top talent and technology amidst a challenging market for start-ups.

- Google, Microsoft, and Amazon are favoring licensing deals over acquisitions for AI start-ups.

- These arrangements help avoid regulatory scrutiny while securing technology and talent.

- Critics express concern about the impact on remaining employees and the innovation ecosystem.

- The trend reflects a shift in the tech industry as start-ups face financial challenges.

- More unconventional deals are anticipated as large firms seek competitive advantages in AI.