The world's major IT players, including Google, Apple, Microsoft, Intel, Facebook, Twitter and Salesforce - are racing to invest in, acquire and absorb cutting-edge artificial intelligence start-ups and scale-ups, according to Hampleton Partners' latest Mergers & Acquisitions (M&A) Market Report.
It says that the three key AI sub-sectors - machine data analysis, natural language processing and machine vision - have all shown impressive growth rates over the past 24 months, but it is the machine data analysis category that is attracting most buyers, with half of all deals (49%).
The largest deal in machine data analysis in the first-quarter 2018 was Roche's acquisition of Flatiron Health for $1.9bn. This oncology-focused electronic medical records (EMR) company's value lies in its ability to capture unstructured data and combine it with EMR to generate real-world evidence.
Machine data analysis includes business and data analytics, forecasting models, big data machine learning, statistics recognition and predictions.
The next biggest sector for AI-acquisitions is Machine Vision, with 31% of deals over the past 24 months. Video and image recognition and analysis are expanding into many sectors, from advertising to robotics and from physical security to healthcare analysis.
One active acquirer in this sector is Chinese tech giant Baidu, acquiring US start-up xPerception to help build its autonomous driving and augmented reality efforts, through object recognition and depth perception technology.
Overall, the number of artificial intelligence-related M&A deals has shown impressive growth year-on-year.
Particularly encouraging for the long-term growth of the sector and future exits is the level of VC investment with venture-backed early-stage AI companies securing more than $1.9bn in just the first-quarter of 2018. These investments focused particularly on robotic automation, autonomous vehicles (AV) and predictive analytics.
European acquirers are in a strong position moving forward in the AI sector, with a rise of all European targets being acquired by intracontinental buyers from 38% in 1H 2017 to 44 per cent 1Q 2018. The high number of European M&A deals is a testament to Europe's competitiveness in AI technology and recent commitments by national governments to back AI development further, augurs well for the sector as overall AI market size is forecast to grow from $21.46bn in 2018 to $190bn at a CAGR of 37%.
Heiko Garrelfs, director, Hampleton Partners, said: "It's revealing to see that machine data analysis companies are being targeted most heavily by buyers, with the first quarter 2018 outperforming the first half of 2017. The IT giants fully understand the importance of AI to data analysis, enabled by massive data sets and cheap, readily available and scalable computing power that are combining to change their businesses fundamentally."