Artificial intelligence startup Hugging Face Inc. is reportedly seeking to raise $200 million in venture capital.

It’s said that Salesforce Inc. will lead the proposed round, which will more than double the privately-held company’s valuation, which currently stands at $2 billion. The money will come from Salesforce’s venture capital arm, Salesforce Ventures, and several other unnamed backers, The Information said in its report. It notes that Salesforce is prepared to pay a steep price to obtain a stake in Hugging Face, which operates a platform that allows companies to store and use AI software.

Hugging Face’s platform is similar in some ways to GitHub, which is used by software developers to host their code, manage training datasets and collaborate with others on it. It currently hosts more than 100,000 open-source AI models, which developers can use as the basis of their AI applications. In addition, developers can submit their own neural networks to the platform.

New York-based Hugging Face operates a number of projects, including the BigScience research initiative that has built what is claimed to be the world’s largest open-source natural language processing model. It also offers paid functionality such as AutoTrain, which helps to automate the task of training AI models, and Inference API, which allows developers to host neural networks without managing the underlying infrastructure. Meanwhile, its Infinity offering is used by developers to increase the speed with which a neural network processes data in production.

The startup has already raised more than $160 million in funding, closing on its most recent, $100 million round in May 2022. Hugging Face said at the time of that round that it counted more than 100,000 companies using its Hugging Face Hub to host their AI projects.

The Information said the proposed round would take Hugging Face’s valuation to $4 billion, which is about 100 times greater than its current annualized revenue. It counts some of the biggest names in the technology industry as its partners and customers. For instance, it has partnered with Amazon Web Services Inc. since 2021, selecting AWS as its preferred public cloud platform.

It also collaborated with ServiceNow Inc. on a generative AI model called StarCoder, which can generate software code in multiple programming languages. Earlier this month, it added Nvidia Corp. to its list of partners, enabling customers to deploy AI models directly onto the Nvidia DGX Cloud supercomputing platform.

Now is an opportune moment for Hugging Face to raise new funds, as there has been an explosion of interest in AI this year thanks to the popularity of OpenAI LP’s ChatGPT. A number of high-profile AI startups have already closed on bumper funding rounds this year, while tech companies of all shapes and sizes are scrambling to add AI features to cash in on the trend or remain relevant.

While OpenAI and ChatGPT have stolen most of the headlines around generative AI this year, many competing models are actively being developed elsewhere by other companies, said Charles King of Pund-IT Inc.

“This is especially true for AI models that are designed to meet enterprises’ substantial requirements around security and replicability,” the analyst added. “Hugging Face’s clear focus on open-source projects and code place it well apart from the multi-billion investment Microsoft made in OpenAI. It’s reasonable to assume that many of the companies currently working with Hugging Face have little desire to become reliant on an AI platform and technology that’s so deeply tied to Microsoft.”

Salesforce is a prime example. The company has invested millions of dollars into its own AI models in recent years as it looks to build on its existing Einstein AI capabilities. Those efforts have borne fruit, with Salesforce introducing a number of new AI features this year. Some of its latest innovations include the new generative AI capabilities in its Sales Cloud and Service Cloud applications, which came after similar updates to Marketing Cloud and Commerce Cloud. By investing in Hugging Face, Salesforce could potentially become a key player in the development of open-source AI technologies.

Holger Mueller of Constellation Research Inc. said Hugging Face has emerged as the AI model repository of choice for many of the tech industry’s biggest companies. “It’s also a key partner for many vendors, so it represents a good investment for Salesforce,” he added. “Salesforce needs access to more AI models, and any deal with Hugging Face will surely benefit its customers, providing them with easier access to one of the world’s largest AI model libraries.”

Image: Hugging Face