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Snowflake Is in Talks to Buy Reka AI for $1 Billion

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(Bloomberg) — Snowflake Inc. is in talks to acquire startup Reka AI for more than $1 billion, expanding the software maker’s effort to offer generative AI capabilities, according to people familiar with the matter.

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Reka AI makes large language models — software trained on massive swaths of the internet that can be used for a range of tasks, such as captioning images or as a customer-supported chatbots. The startup was founded in 2022 by researchers from Alphabet Inc.’s Google and Meta Platforms Inc. It was valued at about $300 million in a 2023 investment round, which included funding from Snowflake’s venture arm, according to a Reuters report.

Snowflake makes tools to organize and analyze data in the cloud and sees generative AI, which produces text, voice or images in response to users’ prompts, as an accelerant to its business. It released its own large language model, Arctic, in April. The company also lets customers use third-party AI models, such as those from Reka, on their data within Snowflake.

The discussions may not result in a deal, according to the people, who asked not to be identified because the talks are private. A Snowflake spokesperson declined to comment. Reka couldn’t be reached for comment.

Sridhar Ramaswamy, who had a decade-and-a-half tenure at Google, took the reins as Snowflake chief executive officer earlier this year. Ramaswamy was Snowflake’s senior vice president of AI before becoming the CEO. He joined the company last year when it acquired Neeva, an AI-powered search engine.

Shares of Snowflake have dropped 17% this year, lagging behind the iShares Expanded Tech-Software Sector ETF, which has gained 3.3%. The company’s revenue growth slowed in 2023 after many businesses cut back on their software purchases. This trend, termed cost optimization, also affected cloud providers like Amazon.com Inc. and Microsoft Corp.

Technology giants have rushed to partner or acquire startups working in the competitive field of generative AI. Microsoft has bankrolled OpenAI’s efforts and recently hired much of the staff of Inflection AI. Qualcomm Inc. is teaming up with semiconductor startup Ampere to work on AI-oriented chips. Salesforce Inc. has invested in multiple AI startups as it integrates the technology through its customer-oriented apps.

Databricks, a startup that is generally seen as Snowflake’s main competitor, has also released its own open-source large language model and last year acquired AI startup MosaicML for $1.3 billion. Databricks was valued at $43 billion in September, compared with Snowflake’s current market value of about $55 billion.

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