Why Google, Microsoft and Amazon Shy Away from Buying A.I. Startups

Google, Microsoft, and Amazon are increasingly opting for complex licensing deals with AI start-ups rather than outright acquisitions. This trend has emerged as these tech giants seek to acquire technology and talent while avoiding regulatory scrutiny from agencies like the Federal Trade Commission. For instance, Google recently licensed technology from Character.AI for $3 billion, allowing the start-up's founders and a significant portion of its employees to return to Google without the company being fully acquired. Similar arrangements have been made by Microsoft and Amazon with other AI firms, such as Inflection and Adept, where substantial sums were paid to license technology and hire key personnel. These deals provide quick returns for investors but leave behind orphaned companies with remaining employees who do not benefit financially from the transactions. Critics argue that this approach undermines the traditional start-up ecosystem, where all contributors are rewarded. As the AI sector continues to evolve, more such deals are anticipated, driven by the need for large tech firms to secure top talent and innovative products while navigating a challenging regulatory landscape.

- Major tech companies are favoring licensing deals over acquisitions to avoid regulatory scrutiny.

- Google recently licensed technology from Character.AI for $3 billion without acquiring the company.

- These transactions allow start-up founders to return to larger firms while leaving behind orphaned companies.

- Critics express concern that this trend could harm the start-up ecosystem by not rewarding all contributors.

- The AI sector may see more of these complex deals as start-ups struggle to compete with larger players.