London-based generative AI startup Stability AI has hinted that it has “more than one” high-profile deal with a big tech partner in the works. AI market-watchers are closely analysing the structure of these deals as emerging GenAI giants look for ways to fund the growth of their very expensive tech and forge alliances with incumbents.
The suggestions come after Bloomberg reported that Stability was looking to raise new cash at a $4bn valuation — four times its price point at its Series A in October 2022. One former employee tells Sifted it had been in negotiations with Amazon Web Services (AWS) and Nvidia as early as last November.
GenAI companies like Stability have extremely high server and compute costs and hence have been huge guzzlers of capital. That’s why investors say GenAI companies like Stability could be looking at more creative ways to raise capital than a simple cash injection.
A Stability deal could take the form of a commitment to provide more resources in exchange for compute power. The latter could be even more helpful than cold hard cash, given that Emad Mostaque, the company's CEO, has said he’s hoping to grow his compute power by 5x or 10x in 2023.
An arms race in the cloud
That’s where more collaboration with AWS — Amazon’s cloud computing arm — could make sense. AWS has been Stability’s preferred cloud provider since last year, and Amazon is currently playing catchup to Microsoft when it comes to building generative AI into its cloud offering.
“In the general arms race between the big cloud providers, both Google and AWS need to move now that Microsoft partnered so heavily with OpenAI and was the first mover there,” says Rasmus Rothe, an AI investor at Berlin-based firm Merantix. “I think for AWS it makes sense to have a similar partner on the AI side.”
AWS has also already partnered with large language model (LLM) builder Anthropic, while Google is partnered with Cohere and owns London-based DeepMind, which are also developing LLMs. In addition to OpenAI, Microsoft has struck partnerships with self-driving car platform Wayve and threat detection platform Primer.
One notable compute provider that’s yet to officially partner with a model-builder is Nvidia, and Rothe says a partnership with a company like Stability could also make sense for the American chip-builder.
'Equity for compute'
Rothe also says that an “equity for compute” deal would make sense for both AWS and Stability, as it would likely give the latter cheaper access to the GPU resources it needs as it looks to train large models in the future. “It could mean AWS basically gets $100m worth of equity, but gives [Stability] $200m or $300m worth of compute… It’s quite synergistic for both,” he says.
But, Rothe adds, this discounted access to compute could come with a loss of independence for Stability, as AWS would be able to influence the direction of the company as a strategic investor.
“If [AWS] are the major investor in this round, then they might certainly have an impact on the development roadmap in terms of what new features and models are developed that ultimately serve their enterprise customers the best,” he says.
“It might raise some concerns with investors who look for a pure cash return, investing in such a round if there's such a big strategic [investor] already involved that might have different incentives.”
Sifted reached out to Stability for comment on a possible investment from AWS and Nvidia, but the company declined to respond.
