Big Tech’s acqui-hire strategy heats up as demand for AI talent soars

Meta’s $15 billion investment in Scale AI for a 49% stake is the latest in a series of transactions that large technology companies have made to acquire talent as they seek to get ahead in the AI race.

Such acquihiring is not just a trend, but a strategic necessity for these companies and is likely to see more traction, as the demand for AI talents will continue to increase, say experts.

In the last two years, large technology players have been acquiring AI startups for their technology teams. Microsoft paid $650 million in a licensing deal to Inflection AI, whose cofounder Mustafa Suleyman is now heading Microsoft AI. In a similar licensing deal, Amazon hired AI startup Adept cofounder David Luan and others who joined Amazon’s AGI team.
On the home front in India, well-funded AI startups Krutrim and Sarvam acquired semiconductor startup Bodhi Computing and legal platform Samta Law, respectively, to enter new sectors.

Strategic play

There are a couple of reasons for this. “We’re at an inflection point where foundational AI talent is in such short supply and high demand that companies are willing to buy entire teams to accelerate their AI roadmap,” said Sachin Arora, partner and leader – data & analytics, agents and cloud at PwC India.

Take Meta for instance. Following the $15 billion investment, Scale AI founder Alexandr Wang will report to Meta CEO Mark Zuckerberg and will lead the social media giant’s new AI lab focused on superintelligence.
Arora pointed out that unlike in the software-as-a-service sector, where acquihires were often about engineering execution, in AI, it’s about vision, research and IP. “You’re acquiring not just builders but boundary-pushers, people who define what’s next,” he added.
Unlike a few years ago, when acquisitions were a norm, regulatory scrutiny has increased in recent times. EY India technology consulting partner Hari Balaji said established tech giants are seeing escalating regulatory scrutiny prompting them to grow through reverse acquihires without triggering anti-trust alarms.

In addition to this, acquihires are also an avenue for companies to enter highly competitive sectors and acquire new customers.

New avenues to focus

A lot of this is stemming from a small pool of talent that is currently available in AI.

A Bengaluru-based investor earlier told ET on the condition of anonymity that beyond accelerating the AI journey, increasing the market share and acquiring new capabilities are the other reasons for M&As and acquihires. “In our portfolio, some of the startups are evaluating companies that bring key AI capabilities for one of the three reasons mentioned,” he had said.

But these are early days in India. “What we are seeing are small deals or acquihires and not large deals that would attract large enterprises yet, which are a huge value add,” Kae Capital general partner Gaurav Chaturvedi earlier told ET. “Those are beginning to happen in the US. These will take time to pan out in India.”