AI Unicorns Are Being Gutted As Big Tech Poaches Talent And Even Founders. FTC Boss Warns Of A 'Risk Of Monopolization'

Artificial intelligence (AI) is seeing a major power shift. Big Tech companies like Microsoft, Google, and Amazon are quietly picking off talent and technology from promising AI startups without fully buying them out. These companies, often called “AI unicorns” because of their billion-dollar valuations, are being hollowed out as their top executives, key engineers, and even founders are hired away by tech giants looking to dominate the AI race.

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Big Tech’s Strategy is Poaching, Not Acquiring

Instead of fully buying these startups, Big Tech is making deals to use their technology and hire their top employees. This helps them avoid the government scrutiny that comes with big mergers while still getting the best people in the AI industry.

Earlier this year, Microsoft made a deal with AI startup Inflection, paying $650 million to use Inflection's AI models and hiring almost all of the startup's employees, including its co-founder Mustafa Suleyman. 

Amazon is doing the same with Adept, another high-profile AI startup, hiring its CEO David Luan and several other top executives while licensing the company’s AI technology.

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These types of deals let Big Tech expand its AI capabilities quickly without the hassle of a full takeover, which attracts government crackdowns. Nevertheless, the Federal Trade Commission (FTC) is already looking into whether Microsoft's deal with Inflection and Amazon’s with Adept were set up to avoid antitrust regulations. 

Apart from the FTC inquiry, at least three U.S. Senators have also called for an investigation.

FTC Chair Lina Khan is warning that these talent-poaching deals are a way for Big Tech to sidestep competition and could result in monopolization. “At this moment, AI is a nascent technology that could catalyze enormous growth and innovation. There’s an enormous opportunity here for a vibrant market, but we also see risk. We see a risk of consolidation. We see the risk of monopolization,” Khan said. 

If a few dominant players control most of the talent and technology, smaller companies might not get a chance to thrive.

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Why Are AI Startups Selling Out?

So, why are these AI unicorns giving up their talent and tech? The truth is that many of these startups are struggling to make money. For example, Character. AI, once valued at $1 billion, had trouble generating revenue despite its popularity. And now, Google has appointed Noam Shazeer, the former head of the AI startup and a longtime Google researcher, to co-lead its main AI project, Gemini, along with a handful of other employees. 

Creating advanced AI models requires huge amounts of computing power, which is very expensive. Startups that can’t afford these costs often seek help from Big Tech. These deals provide a lifeline, helping the startups survive while giving tech giants access to the latest AI technology and the skilled people needed to develop it.

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In many cases, the founders and top executives of these startups get cushy roles at companies like Microsoft, Google and Amazon. Meanwhile, the remaining employees are left trying to pick up the pieces. 

Investors who initially backed these startups are also left with smaller returns than they were hoping for. As a result, some AI unicorns are being reduced to the shadows of their former selves, operating without their best minds or enough resources to compete with Big Tech.

Big Tech has a long history of finding ways to stay ahead of regulators, and we’ll have to see whether the government will act swiftly enough to prevent further consolidation in the AI space.

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