IBM CEO Arvind Krishna has been outspoken about how A.I. will transform business. Earlier this year, he wrote for Fortunecommentary that employees should work “hand in hand” with A.I., and months later he moved to freeze hiring given rapid advancements in the tech. At the same time, he predicted that A.I. could take over 30% to 50% of repetitive tasks, even contending that A.I. could do them better than humans could. And now he’s put his money where his mouth is, with IBM piling into a massive $235 million funding round for the $4.5 billion A.I. unicorn Hugging Face. And it’s not Krishna’s first tie-up with the popular open-source startup, either.
On Friday, IBM announced it was participating in the $235 million Series D funding round for New York–based Hugging Face, the popular library of open-source machine learning models that have contributed greatly to the technology’s popularity as of late.
Since May, Hugging Face and IBM had already been working together on a suite of A.I. tools. As of this month, IBM has also uploaded around 200 open A.I. models to Hugging Face’s platform. One of the models IBM posted to Hugging Face was a collaboration with NASA, marking the space agency’s first ever open-source A.I. model.
In May, IBM announced it would work with Hugging Face on its watsonxai suite of A.I. tools. IBM’s watsonxai is essentially a studio that helps other companies build out a series of A.I.-powered products specific to their business. During the announcement at IBM’s Think conference in May, Hugging Face CEO Clement Delangue said that through this partnership, IBM’s consultants would be able to offer Hugging Face’s vast assortment of models to clients that were interested in using A.I.
Hugging Face also has partnerships with other major tech players including Microsoft and Amazon. The Amazon partnership is structured similarly to IBM’s, where Hugging Face models are available to AWS’s enterprise clients. Although it does have the added wrinkle that Hugging Face will use Amazon’s Trainium chip to train the next version of its own model, named Bloom.
IBM’s CEO is convinced A.I. is here to stay
IBM has been bullish on the fact that A.I. will ultimately get integrated into practically every company. Krishna said he expected A.I. and machine learning to automate away many of the back-office processes that are ubiquitous in the workplace. IBM’s human resources department was able to get 50 people to do the work it had previously taken hundreds of HR managers to perform by using A.I., Krishna estimated.
Krishna has on more than one occasions touted A.I. as a solution to a variety of problems that could impact productivity in the future. In May, Krishna said declining numbers in the working-age population mean A.I. would play an important role in economic productivity as companies face a shrinking labor force.
More recently in an interview with CNBC, he added that A.I. would help keep quality of life high by spurring more productivity. Perhaps his most high-profile statement about A.I. was when he called for a hiring freeze of an estimated 7,800 roles the company expected to be impacted by A.I. over the next five years.
IBM said it had not implemented a hiring freeze. “There is not nor has there been a blanket hiring pause in place at IBM,” an IBM spokesperson told Fortune in an email. “We are being deliberate and thoughtful in our hiring with a focus on revenue-generating roles, and we’re being very selective when filling jobs that don’t directly touch our clients or technology. In fact, we are actively hiring for thousands of positions right now.”
Hugging Face’s impressive Series D financing round
IBM wasn’t the only big name in tech to pony up some cash for an investment in Hugging Face. Google, Amazon, Nvidia, Intel, and Salesforce all participated. After its latest $235 million funding round the startup’s valuation is now $4.5 billion. That amount is more than double the roughly $2 billion valuation Hugging Face had during its last fundraising round in April 2022, according to data from PitchBook.
Hugging Face’s valuation is reportedly 100 times the startup’s annualized revenue. That fact would ordinarily spook some investors but in this case likely reflects the appetite from investors to stake out claims in the biggest players in the burgeoning field of A.I.
“Investing a relatively small amount of capital, even at 100x annualized revenue, is a sound strategic investment by IBM,” UBS wrote in an analyst note, commenting on the deal. “While the investment dollars are small, a deeper relationship and access to a leading provider of AI tools at a minimum provides market intelligence in a fast moving dynamic market.”
Update Aug. 30, 2023: This article has been updated with a comment from IBM.
