Utopai Becomes a Unicorn as Video AI Takes Off

While much of the AI industry has fixated on new personal AI assistants from Meta and OpenAI, video AI is enjoying a quiet renaissance. Hollywood mogul Jeffrey Katzenberg is teaming up with the former head of OpenAI’s Sora app to launch a new AI film company. Startup Higgsfield quadrupled its valuation to $5.4 billion in August. And Kling AI, the video unit of Chinese social media giant Kuaishou Technology, raised nearly $3 billion at a $15 billion valuation over the summer.

The latest video AI company to seize this moment is Utopai Studios, a 4-year-old film startup based in Mountain View, Calif. Utopai closed a funding round for $60 million that valued it at $1 billion and has already received term sheets for a subsequent round that would value the company at $2 billion to $3 billion, according to someone close to the company.

The enthusiasm for video AI startups follows improvements in the quality and length of the clips that video AI models can generate. In September, Higgsfield announced that it had crossed $1 billion in annualized revenue, showing that the technology has serious commercial potential.

Utopai has more than 20 projects in the works right now, including two TV series and three full-length films that are set to debut in theaters next year, one of which is an animated adaptation of the children’s book “The Most Serious Fart.”

Utopai aims to debut its films in about 3,000 theaters in North America. That’s a step up from previous films that have heavily relied on AI, which have tended to be proofs of concept for technology that have been screened in a single theater, Chief Executive Cecilia Shen said in an interview.

“We realized that, first of all, there‘s no margin at all for just selling software in the entertainment industry, and secondly, selling good software doesn’t guarantee you to have a good art house film because it's just a part of the process, and it really depends on how humans are leveraging it to produce great content,” she said.

Shen previously worked on AI at Google’s X moonshot team before founding Utopai in 2022. While other companies like Kling, Runway and Luma focus on training cutting-edge video and world models, Utopai draws on a variety of models from other providers. It has also customized the open-source video model MiniMax H3 to create its own video AI model, which currently ranks in second place on a leaderboard of text-to-video models compiled by Artificial Analysis, the AI benchmarking firm.

Utopai’s strategy of being its own film studio also sets it apart from Higgsfield, which offers a variety of AI models to creators through its application. Utopai also provides its software to outside filmmakers, placing it in a similar lane to Katzenberg’s company, which is in talks with OpenAI to access Sora, tweak it and sell software or other services using it.

The excitement over AI-generated video faces hurdles. Many in Hollywood are suspicious of AI due to fears it will encroach on valuable IP and displace human workers. That could advantage Katzenberg’s company thanks to his creative credentials: before launching DreamWorks, he headed Walt Disney Studios.

By using AI tools, Utopai can cut the costs that a traditional film would pay for planning out scenes and CGI by 80% to 90%. But Utopai still pays for directors and actors to work on its films, said Shen, and is also raising financing for individual projects, in addition to the company’s funding rounds.

In the longer term, Utopai is interested in branching out into new genres, including interactive formats, sports content and animated musicals, she said.

In China, AI generated videos have found a broad audience on social media, but in the U.S. people are continuing to stream TV shows on Netflix, and people are going back to movie theaters, said Shen, pointing to the summer box office success of The Odyssey.

Still, with “You Can See Everything,” the documentary about Theranos founder and convicted fraudster Elizabeth Holmes, captivating audiences across the U.S. in recent days, it’s a reminder that reality can be compelling in ways that AI can never reproduce.

Here’s what else is going on…

Big Number

Microsoft said it has observed cyberattacks by a Chinese state-aligned actor known as Storm-0940 that used a Chinese AI agent called Artex to automate the attacks targeting hundreds of organizations globally across a wide range of industries.

Overheard

OpenAI would support requirements for AI companies to have shutdown controls for their models, mandated annual independent audits, and stronger cybersecurity practices, a senior company official wrote in a letter to California Gov. Gavin Newsom.

Meta said during its third-quarter earnings call on Wednesday that its AI agent app Muse has been adopted by more than 10 million users.

Deals and Debuts

See The Information’s Generative AI Database for an exclusive list of private companies and their investors.

DeepSeek, the Chinese AI lab, is wrapping up roughly $15 billion (about 100 billion yuan) in new financing led by CATL and Tencent.

Nebius, a neocloud, announced on Thursday that it has entered into a $3.5 billion senior secured facility provided by Citi.

Flapping Airplanes, a year-old AI research lab, raised $1 billion in a Series A funding round at a $6 billion valuation, led by Index Ventures and Lux Capital.

Vegafin Capital, an AI-first lending startup for India's small businesses, raised 10 billion rupees (about $106 million) in a funding round led by Premji Invest.

Blacksmith, an AI code-testing startup, raised $66 million in a Series C funding round at a $1 billion valuation, led by Sequoia Capital.

Kevel, which builds AI-driven infrastructure for retail and commerce media networks, raised $52 million in new capital from expanded investments by Fulcrum Equity Partners, dunnhumby Ventures, Iberis Capital and ORIX Corporation USA's Growth Capital business.

Coherence Neuro, which is developing AI models and a brain implant to detect and treat cancer, raised $45 million in a Series A funding round led by Founders Fund and the OpenAI Startup Fund.

Watchtower Labs, a military logistics AI company, emerged from stealth with $35 million in seed financing led by Shield Capital and Conviction Partners, with participation from Founders Fund.

Nirva, an AI pendant creator, raised a $25 million pre-Series A round.

CapitalOS, a San Francisco-based developer of tech to allow users and agents to issue and use cards, pay bills and manage cash, raised $21.9 million in Series A funding led by LGVP.

Longeye, which makes AI-powered evidence-analysis tools for U.S. criminal justice agencies, raised $20 million in a Series A funding round led by N47.

Azoma, which makes a platform for AI shopping agents, raised $11.2 million in a Series A funding round led by Puma Growth Partners.

Dataline, which connects AI agents to data sources, raised $10.6 million in a seed funding round led by Dispersion Capital and Lattice Fund.

Ultra Security, an AI agent security platform, emerged from stealth with $10 million in seed funding from Ludlow Ventures, Hidden Capital, Entrée Capital, Detroit Venture Partners, firedrop and FDVC.

Holly, which makes an AI-powered workforce platform for government agencies, and 17A, a government technology firm, were awarded a $1.1 million grant from the Public Benefit Innovation Fund and the Recoding America Fund to help state governments prepare for AI.

Nvidia on Wednesday announced new deals with chip substrate suppliers Ibiden, Samsung Electro-Mechanics and Unimicron, to ensure it has enough component materials to produce more of its AI server chips in the coming years. It said the deals, which include a multibillion-dollar reservation with Japan-based Ibiden, would grow substrate capacity for Nvidia products by two and a half times over three years. Substrates bridge compute dies with underlying circuit boards.

Meta announced a restructuring Wednesday morning to create a new class of non-voting shares that the company said will allow it to raise new capital for AI investments while preserving CEO Mark Zuckerberg’s voting control in the firm. The restructuring was partially shaped by concerns that a proposed wealth tax in Meta’s home state of California could prompt Zuckerberg to move away.

The creators of PHP, an open source programming language used by the majority of the world’s websites, on Wednesday urged web maintainers across the globe to install a new update after researchers using AI found a flaw that could put those websites at risk of being hacked.

OpenAI will make its models available through Google Cloud, the companies announced this morning. The move lessens OpenAI’s reliance on Microsoft, where the companies once shared exclusivity. OpenAI is also expanding ChatGPT ads to 26 more countries as it tries to turn advertising into a bigger source of revenue to help cover its AI costs.

Recursive, a neolab founded by You.com CEO Richard Socher, released a free coding model called Flint on Wednesday. The model is small enough to run on a laptop.

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