Cisco joins a group of companies investing in Canadian AI startup Cohere

Cisco Systems (NASDAQ:CSCO) is part of a group of tech companies investing in Canadian artificial intelligence startup Cohere that is said to value the firm at $5B.

Nvidia (NASDAQ:NVDA) and Salesforce (NYSE:CRM) are also a part of a new funding round, Reuters reported, citing a source familiar with the matter. The money from Salesforce will come from its Salesforce Ventures arm. Canadian pension fund PSP Investments is also participating in the round, the news outlet added, citing the source.

Cisco made its public announcement alongside the news that it has created a broader $1B global AI investment fund.

The investments are just the first part of the fundraising efforts by Cohere. The company generated $35M in annualized revenue through the end of March, up from $13M in the prior year, Reuters added, citing the source.

The new funding values Cohere at $5B, up from a reported $2.2B in June 2023.

Cohere, which makes money by selling its large language models and applications to other companies, competes with other AI startups like Mistral, Anthropic and OpenAI.

Microsoft (MSFT) has backed Mistral and more famously, OpenAI, maker of the ChatGPT generative AI chatbot that took the world by storm in late 2022.

Anthropic has received funding from Amazon (AMZN), Google (GOOG) (GOOGL) and Salesforce.

AI is expensive

Companies like OpenAI, Cohere, Elon Musk’s xAI and others have raised extraordinarily large amounts of money to build AI models that require heavy compute power, including purchasing expensive processors from companies like Nvidia.

Generating revenue from AI has been a mixed bag for the technology sector, with Nvidia, Microsoft and others earning most of the attention. Conversely, enterprise software companies like Salesforce and others have not benefited as much from the AI spending boom.

Seeking Alpha Investing Group Leader Joe Albano said the mixed success for the broader tech sector should not come as a surprise to investors.

“The software industry is a complicated and sometimes immeasurable world coming together to produce services and products,” Albano said via email. “It’s no wonder the understanding of AI software is that much harder to grasp and monetize, let alone invest in.”

Albano is set to appear at the Seeking Alpha Investing Summit on June 18. For more information, please visit the event website.