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After Microsoft’s OpenAI play, a feast at the generative AI buffet

Two generative AI startups—Character and Anthropic—are seeking hundreds of millions of dollars at unicorn valuations as investors scramble to secure stakes in the segment.

A few weeks ago, Microsoft fired the largest volley in the generative AI wars when it announced a partnership with OpenAI and an investment to the tune of $10 billion. That deal, unprecedented for the space, catapulted the company’s valuation to $30 billion and sent investors scrambling to back the next major AI startup.

News broke Friday that two other generative AI startups are seeking hundreds of millions of dollars at unicorn valuations:

Character aims to raise $250 million, easily putting its valuation past $1 billion, The Information reported. The startup was formed by two former Google researchers and is similar to OpenAI’s ChatGPT chatbot in that it allows users to have conversations with an AI that can assume different characters, including famous fictional personalities like Tony Stark and Walter White.

Character reportedly raised a seed round at an undisclosed valuation and has received backing from Gmail creator Paul Buchheit and former GitHub CEO Nat Friedman.

Anthropic, an AI startup founded by former OpenAI employees, is working on a $300 million funding round that would set its valuation at around $5 billion, according to The New York Times. Anthropic has been backed previously by disgraced crypto mogul Sam Bankman-Fried.

Other generative AI startups were cashing in on the hype before Microsoft’s OpenAI deal. Jasper, an AI content creation platform, raised $125 million in November, bringing its valuation to $1.5 billion. Stability AI, the creators of AI-generated image software Stable Diffusion, raised $101 million in October. DeepL, an AI-powered language translator, raised $100 million just days before the OpenAI deal was announced.

Enterprises bite at the generative AI apple

Established players are also rushing to capitalize on the generative AI craze. Chinese giant Baidu is planning to add ChatGPT-like functionality to its search engine’s results, South China Morning Post reported. Image clearinghouse Shutterstock is integrating generative AI into its platform for customers to create images.

Google published a paper Thursday on MusicLM, a model that generates music from text prompts. The company has no plans to make MusicLM commercially available and noted that some of the music it generated may have violated copyrights.

Several legal challenges have arisen alongside the popularity of generative AI models. Getty Images has sued Stability AI for using images from its site to train Stable Diffusion. Microsoft, GitHub and OpenAI are the subjects of a class-action lawsuit accusing the companies of violating copyright while training an AI-powered code completion assistant.

These legal fights highlight the thorny challenges for companies innovating in novel generative AI, particularly for tech giants guarding against larger financial and reputational risks.

Featured image by Richard Baker/Getty Images

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