FOMO on Generative AI Breathes Life Into Listless Tech M&A
Booming demand for generative artificial intelligence is beginning to drive startup acquisitions in that space, as large technology providers vie for a piece of a suddenly captivating market. But the upswing could also help rekindle merger-and-acquisition business across the startup universe, analysts say.
The number of tie-ups has remained low despite sharp drops in venture investing and public-market debuts—conditions that generally prompt more startups to seek the lifeblood of cash from potential buyers. Among U.S.
tech firms, there were 425 M&A deals with a total value of $31.9 billion in the first quarter of 2023, down from 563 deals valued at $173.3 billion over the same period last year, according to PricewaterhouseCoopers A pair of high-price acquisitions of generative AI startups announced last week may signal the start of a turnaround, some investors and analysts say. Databricks, a data storage and management company, last Monday said it agreed to buy MosaicML, a San Francisco-based language model platform developer, in a deal valued at $1.3 billion.
On the same day, Thomson Reuters, a Canadian media and publishing company, said it would acquire Casetext, a San Francisco startup developing an AI-powered legal assistant, in a $650 million all-cash deal. In May, Snowflake, a cloud-data warehouse company, said it bought Neeva, a Mountain View, Calif., startup that uses generative AI to search data.
Terms of the deal weren’t disclosed. While access to AI capabilities and talent has long been a key driver of M&A activity by cloud and data giants, “the explosion of generative AI services, and the rapid pace at which the technology is advancing, has certainly upped the ante," said Dan Ridsdale, global head of
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