The race for artificial intelligence dominance is pushing Big Tech into hiring practices that may ultimately weaken the very ecosystem they rely on for innovation, The Wall Street Journal reported Sunday.
Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), Amazon (NASDAQ:AMZN) and Google’s parent Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) have been paying staggering sums, sometimes valued in the billions, to lure top AI researchers and startup founders. Instead of traditional acquisitions, they increasingly pursue so-called “reverse acquihires,” hiring key talent and licensing technology while leaving the original companies stripped of their leadership.
Microsoft (NASDAQ:MSFT) pulled in Mustafa Suleyman from Inflection AI last year and paid $650 million for access to its technology. Meta (NASDAQ:META) followed a similar path in June, putting nearly $15 billion into Scale AI while bringing over Chief Executive Alexandr Wang and part of his team.
These deals are attractive for Big Tech because they are quick, avoid messy integration and sidestep regulatory scrutiny. For researchers, the lure is equally powerful: salaries more akin to professional athletes than software engineers.
But the trend comes at a cost. Venture capitalists see far smaller returns, and rank-and-file employees are often left with little reward. When Google (NASDAQ:GOOG) (NASDAQ:GOOGL) dismantled the AI startup Windsurf in a $2.4 billion deal this summer, employees reportedly left in tears, realizing they had missed out on the payout that might have come from a more conventional acquisition.
For Silicon Valley, this cuts against its traditional high-risk, high-reward model, where even non-founders could share in the upside if a startup succeeded. As Jon Sakoda of venture firm Decibel put it, the implicit promise in the Valley has always been that if you take the risk, everyone wins when it pays off, the Journal reported. That trust is fraying as more employees discover their equity is worth far less than expected.
If the pattern continues, many workers who might have joined fledgling companies could instead choose the stability of established giants. That could thin the pool of startup talent and slow the churn of innovation that has long defined the region.
Ironically, the very companies hollowing out startups have historically benefited from nurturing them. Google’s (GOOG) (GOOGL) $50 million purchase of Android in 2005 and Amazon’s (NASDAQ:AMZN) $350 million acquisition of Annapurna Labs in 2015 turned into cornerstone businesses. By relying on quick hires rather than full acquisitions today, Big Tech may secure immediate advantages in AI, but at the expense of the culture that made Silicon Valley a global tech powerhouse, the Journal reported.