In an Investment Freeze, 'Money Flocks to AI'... "Beware of Fake AI Investments"

Two Consecutive AI Company M&A Deals

The merger and acquisition (M&A) fever among generative artificial intelligence (AI) companies is heating up. As the competition to secure AI technology intensifies, funds continue to pour into this sector despite the investment winter. There are concerns that some so-called 'fake AI' companies, which have little or no technological relevance, are boldly promoting themselves as AI firms to attract investment, signaling the need for caution among investors.

On the 28th (local time), U.S. Axios reported that the generative AI craze is expanding beyond the technology sector into consulting, legal, media, finance, and other industries. Axios stated, "The emergence of AI is leading to a restructuring across industries, and the AI investment boom is putting pressure on CEOs of various companies to develop their own AI strategies." The chosen method for these CEOs to establish AI strategies is through M&A.

In the AI field alone, two major M&As were completed this week. On the same day, U.S.-based Databricks announced it had reached a final agreement to acquire MosaicML, which helps build proprietary AI models, for $1.3 billion (approximately 1.7 trillion KRW). Canada-based media group Thomson Reuters announced the previous day that it would purchase Casetext, a legal AI assistant service, for $650 million. Casetext is an AI legal assistant adopted by more than 10,000 law firms in the U.S. alone and is regarded as a leader in the 'legal tech' sector that integrates technology with law. U.S. software company Salesforce doubled the size of its fund for supporting generative AI startups through its investment arm Salesforce Ventures to $500 million (approximately 655 billion KRW).

The AI investment boom is spreading beyond tech companies to other industries. Global consulting firm PricewaterhouseCoopers (PwC) has decided to invest $1 billion in AI projects over the next three years, led by its U.S. branch. Strategy consulting firm Accenture recently completed the acquisition of Plutora, an industrial AI company headquartered in India. Accenture plans to apply Plutora’s AI technology, acquired through this deal, to strategy, consulting, digital, technology, and operations for clients in the energy, chemical, metals, and pharmaceutical industries.

[Image source=Reuters Yonhap News]

This investment frenzy originated from the AI boom sparked by the emergence of ChatGPT. OpenAI, the developer of ChatGPT, saw its corporate value more than double in just over a year, and U.S. semiconductor company Nvidia, considered a primary beneficiary of AI, saw its stock price surge over 181% compared to the beginning of the year (as of the close on the 28th). Funds are also flowing into AI startups. According to market research firm PitchBook, funding for generative AI startups reached $1.37 billion last year alone.

Axios pointed out that as companies classified as AI firms or those with highlighted business relevance to AI have seen their market values soar, 'fake AI' companies trying to ride the AI theme are also emerging rapidly, calling for investor caution. PitchBook noted, "As the market rapidly expands, venture capital is concentrated on AI based solely on expectations, regardless of substance or performance," adding, "Meanwhile, non-AI ventures unrelated to AI are being neglected." It further warned, "Because many tech companies seeking investment are claiming to be AI-related, investors need to exercise caution."

This content was produced with the assistance of AI translation services.