Character.ai is pivoting its strategy following the departure of its founders to Google (NASDAQ:GOOGL) in a $2.7 billion deal.

What Happened: Dominic Perella, the interim CEO, stated that the San Francisco-based startup will now prioritize enhancing its consumer products, particularly its popular chatbots. The company is stepping back from developing large language models due to the high costs involved, Financial Times reported on Wednesday.

Perella explained, "It got insanely expensive to train frontier models... which is extremely difficult to finance on even a very large start-up budget."

The company aims to leverage the traction gained by its consumer products.

In August, Google acquired 20% of Character.ai's staff and paid $2.7 billion for a one-off license to the startup's models. The deal included rehiring co-founders Noam Shazeer and Daniel De Freitas.

Character.ai's shift mirrors other startups like Germany's Aleph Alpha, which have also abandoned ambitions of building large language models due to prohibitive costs.

Perella remains optimistic, stating, "We're continuing to do AI research... We still own all of our technology, have almost all of our people and we are continuing to grow."

Why It Matters: The departure of Character.ai's founders to Google marks a significant shift in the AI landscape. Google rehired Shazeer, an AI pioneer known for his work on the Language Model for Dialogue Applications (LaMDA). Shazeer left Google in October 2021 to launch Character.ai, which gained backing from his firm a16z. His return to Google is part of a broader collaboration, as Google signed a non-exclusive agreement with Character.ai to leverage its technology.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari