Good morning,

Today, let’s look at how some of the AI fun is starting to crumble. Plus the top tech news you need to know from this week.

Let’s go 👇

This week’s insight

We live in an age where AI continues to alter our lives. The more it progresses, the more AI companies, use cases, and flashy gadgets we’ll see start to cease. 

Character.AI founders return to Google

This is (sort of) the case for the AI startup Character.AI. For context, the startup was founded by former Google employees Noam Shazeer and Daniel DeFreitas to build character or personality chatbots. It secured a $150M Series A funding round last year at a $1B valuation. 

Google has agreed to pay a licensing fee to Character.AI for its models and will bring on its cofounders and many of its researchers. Google will also buy out venture investors at around 2.5 times the valuation, or $2.5B. So, Noam and Daniel will return to the company they previously left to start Character.

Tech’s new acqui-hiring trend

The deal follows a string of similar arrangements by other well-funded AI startups — Adept AI and Inflection AI have both effectively sold themselves to Amazon and Microsoft, respectively, despite raising a ton of capital.

Meta’s cancels celebrity chatbots

Meta's celebrity-voiced chatbots sounded fun, but it didn’t quite gain the traction it hoped for. The company paid millions of dollars to license celebrities’ likenesses like Charli D’Amelio, MrBeast and Paris Hilton. 

But, after less than a year, Meta has decided to deprecate these chatbots in favor of something called AI Studio. This new product allows any creator to customize AI avatars of themselves to answer common questions from fans. It’s another new AI product the company will be testing.

Questionable AI wearables

As for gadgets… well, it’s really difficult to build a consumer gadget that’s better than your phone or watch. 

Humane, the startup that raised $230 million for its $700 AI-powered pin device, has been exploring a potential sale and debt financing after its product launch flopped a few months ago. In an attempt to salvage its ambitions, the company has added former Cisco CEO John Chambers to its board. Similarly, Rabbit, another AI hardware maker, faced its own failed debut just a couple of weeks after Humane's pin was released.

A third startup, Friend, tried to grab the spotlight last week, having raised a $2.5M Series A for its pendant-shaped device at a $50M valuation. The kicker, however, is that it blew nearly all its funds — $1.8M — to acquire the URL: Friend.com. What meaningful progress can it make on AI hardware with the roughly $700,000 remaining? It doesn’t sound like much…

Bottomline

Don’t get us wrong… we’re hyper-bullish on AI and how it will continue to transform our lives for the better. But, what we’ve seen over the past couple of years is a ton of interesting new startups pop up —riding the wave — and raising considerable amounts of money for their questionable products. 

The fun is starting to collapse. More companies will start going bust, or be forced to sell themselves to bigger companies trying to add more AI to their portfolio to boost their “AI strategy” for shareholders.

Top news

• Intel shareholders sue chipmaker after job dividend cuts cause stock plunge. 

• Google antitrust ruling may pose $20 billion risk for Apple where the US judge ruled that the Alphabet-owned search giant was operating an illegal monopoly. 

• Ripple ordered to pay $125 million in penalty for improperly selling XRP tokens.

Other news

• Robinhood results beat estimates on meme-stock, crypto-trading boom for second-quarter earnings on Wednesday.

• YouTube is testing a feature that lets creators use Google Gemini to brainstorm video ideas.

• Apple’s AI features may cost as much as $20 per month - Apple will seek ways to pass the cost onto users. “Software and services make it more lucrative for Apple to pass it on with the Apple One subscription model,” 

• Bumble shares fall 30% after its annual revenue forecast cut sparks growth fears. 

• Cryptocurrencies resume their rebound, bitcoin retakes $59,000. 

• Sony posts 10% profit rise on image sensors, games boost selling 2.4M PS5 units in Q1. 

• Techstars is laying off 17%, ending its $80M JP Morgan-backed AdvancingCities program once the fund is completely deployed at the end of this year. 

• Reddit to test AI-powered search result pages where Reddit users will soon see AI-generated summaries at the top of search results. 

• Microsoft and Palantir partner to sell AI to government agencies, the pair will focus on products for US defense workers to handle logistics, contracting, and action planning. 

• Google DeepMind develops a ‘solidly amateur’ table tennis robot when pitted against a human component.

Deal flow

• Napkin turns text into visuals with a bit of generative AI with $10M in funding from Accel and CRV. 

• Bilt Rewards raises an additional $150M of equity capital, led by the Ontario Teachers’ Pension Plan. This now values it at $3.25B.

• Google has agreed to pay a licensing fee to chatbot maker Character.AI for its models and will hire its co-founders and many of its researchers.

• OpenAI’s Startup Fund has invested in a $3.5M seed round for Heeyo, an AI chatbot to help tutor kids.

• Anduril raises $1.5B at a $14B valuation and has goals of becoming the next great American defense contractor. 

• Level AI Closes $39.4m Series C Funding which intends to use the funds to accelerate growth, innovation, and talent recruitment to advance product development, engineering, and R&D. 

• EQT takes a majority stake in cybersecurity firm Acronis at a $3.5B+ valuation specializing in data protection, cloud, and integrated security solutions for managed service providers and IT teams.

• AI startup ProRata.ai raises $25M and inks deals with major media companies claiming it can accurately attribute and share revenues with content owners from AI chatbot subscriptions.  

• Abnormal Security raises $250 million, eyes IPO — The email security company secures funding ahead of plans to list on public markets by the end of 2025.

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That’s it for this week. I hope it was insightful. As always, let me know what you think and if you have any questions. Cheers!

🌜 Loryn and Nicole from Dark Mode Digest