July 23, 2019

US tech giants are buying up AI startups, but acquisition diversity is on its way

By Luke Christou

While artificial intelligence (AI) technology has the power to transform a range of sectors, US-based technology giants remain the largest investors in promising AI tech startups, according to data and analytics company GlobalData.

Facebook, Microsoft, Apple and Splunk were behind 30% of all acquisitions in the AI space in a four-year period between 2014 and 2018.

Just one of the top five investors – Ireland-based consultancy company Accenture – hailed from outside of the US.

A diversifying AI acquisition market

AI adoption is set to greatly increase across industries in the coming years. A recent report put together by MMC Ventures, The State of AI: Divergence, found that 48% of insurance companies plan to deploy AI initiatives in the next 12 months, as well as 44% of retail companies, 42% of media companies and 40% of transport providers.

Read more: The State of AI in 2019: Are Businesses Buying the AI Hype?

According to Aurojyoti Bose, a financial deals analyst for GlobalData, this will see the AI space’s merger and acquisitions (M&A) market become more diverse, attracting greater investment from businesses outside of the technology industry.

“With increasing adoption of AI across sectors, this space is bound to witness growth in an already burgeoning M&A activity,” Bose said. “Corporates are extensively evaluating options to integrate AI in their business operations and automation initiatives.

“Technology companies have been the dominant deal makers in the AI space. However, with AI making inroads into diverse sectors, the buyer universe is expanding and the space is also attracting investments from non-technology companies.”

The market is already beginning to see investment in solutions designed for specific industry applications. One of the largest M&A deals in 2018, for example, saw biotechnology company Bio-Techne Corporation pay $575m to acquire AI diagnostic solutions startup Exosome Diagnostics.

Looking elsewhere for talent

Given the United States’ market-leading position in AI, and the venture capital available to hopeful startups (eight of the top ten venture capital investors in AI startups are headquartered in the US), it comes as little surprise that the vast majority (70%) of acquired startups are based in the US.

However, corporations are beginning to cast their eyes beyond the US market. GlobalData predicts that while American startups will continue to lead the way, acquirers will increasingly look to markets such as the UK, China, India, Canada and Israel in search of innovation solutions and untapped talent.

Read more: What do investors look for in an AI company?