Insights from Hive Ventures: Deciphering Generative AI Investment Strategies of the Magnificent 7
The Battle of the Titans: The Investment Surge Led By The Magnificent 7
Since the launch of ChatGPT in December 2022, Gen AI has been the major buzzword in the VC market. Almost every VC is looking for deals related to Generative AI, and almost every startup is striving to include the term ‘AI’ in their business proposals. As this technology gradually matures, the architecture of AI becomes clearer, with different layers emerging, creating various opportunities. From the perspective of Hive, we categorized the architecture of the AI industry from the underlying hardware, stacking up to the application layer. It can be divided into:
· Infrastructure Layer: Chips, Cloud, Networking, Data processing, Data Labeling
· Model Layer: Foundation Models, Model Hubs/MLOps/LLMOps
· Applications Layer: Application Modality and Application focus on different sectors
Source: Hive Ventures Analysis
In this wave, we can see tech giants positioning themselves in the sector, especially the recently emerged Magnificent Seven (Microsoft, Apple, Alphabet, Amazon, Tesla, NVIDIA, Meta). Except for Apple, all six have invested in AI startups. However, Apple is not neglecting AI; it has always been a strategist, acting cautiously in the market. When the direction is clear and the overall situation is settled, Apple will then develop new products with excellent creativity or directly acquire startups to complete its technological layout. Now, let’s dive into the strategies of each major player.
Figure 1: List of notable companies and investors in each layer.
Source: Hive Ventures Analysis
We can see that currently, the Magnificent 7 are all involved in investments at the foundational level, especially in the layers of Foundation Models and Model Hubs & MLOps. Microsoft, in particular, has made a strategic move by investing in OpenAI, and other giants are also actively trying to secure their territory in foundation models. Google (Bert,Gemini) and Meta (LLaMA2), both with strong R&D capabilities, have developed their own foundation models. NVIDIA and Amazon have chosen to invest in well-known startups like Anthropic and Cohere. Although Tesla seems somewhat detached, in January, Elon Musk announced Grok from X.AI, positioning itself as a major competitor to OpenAI.
However, at the application layer, there are relatively fewer activities from the Magnificent 7. This suggests that the Magnificent 7 prefer to establish their presence in the foundational layers first and may choose to engage in application-related activities themselves at a later stage.
Within the Magnificent 7, Google stands out as the most dynamic player. Crunchbase data reveals that, since 2018, Google has invested in an impressive 96 companies spanning various stages. In the same timeframe, Microsoft, Amazon, and NVIDIA have each invested in nearly 40 companies, showcasing their substantial involvement. On the other hand, Apple, while not making direct AI investments in recent records, has strategically chosen a distinctive path by focusing on company acquisitions. Pitchbook data highlights Apple’s acquisition of 21 startups since 2017, with notable names like Drive.Ai, Curious AI, and Xnor.AI in their portfolio. These strategic acquisitions primarily target advancements in self-driving technology, voice design, music generation, and image recognition.
Figure 2: No. of Investments made by Magnificent 7 from 2018~2023
Source: Crunchbase Data & Hive Ventures Analysis
Looking at the entry of tech giants into Generative AI, it is evident that this is not just another tech bubble, but a massive technological revolution. According to Dealroom’s statistics, a total of USD$20.3 billion was invested in Generative AI startups in 2023, making it the highest globally funded area for VC investments. With a significant influx of funds and resources into the AI sector, there will be a catalyzing effect, accelerating the integration of AI into corporates and society, expediting its widespread application.
It is foreseeable that in the technology IPO market over the next five years, there will be a reliance on AI startups to reverse the declining trend in IPOs, as substantial investments continue to drive innovation in the AI space.
