Not being American or Chinese may now be a help, not a hindrance
THERE IS LITTLE reason to cheer the cooling of relations between America and the European Union. But it’s an ill wind that blows no one any good. In the fast-growing world of artificial intelligence (AI), Mistral, a French startup, may be a beneficiary of the transatlantic tempest.
Founded in 2023 by former researchers at Meta (parent of Facebook) and Google DeepMind (a British bit of Alphabet), Mistral is no minnow. Worth around €5.8bn ($6.2bn) in June 2024, when it last raised money, it is Europe’s most valuable AI startup. It has been cranking out foundation models rapidly, releasing 16 in the past 18 months. These range from specialised systems such as Codestral, Mathstral and Pixtral for coding, maths and image recognition, as their names suggest, to general-purpose models, of which the latest, Mistral Small 3, was released in January.
At the same time, there is no mistaking the company for a top-tier lab. Its valuation is an order of magnitude smaller than those of American rivals like OpenAI, Anthropic and xAI, the last of which is aiming to raise more money in a single round than Mistral’s entire value. Its models, too, are firmly middling. The sector has innumerable league tables, charting skills from general knowledge to coding ability, and Mistral’s models have appeared at the top of vanishingly few.
So Mistral has tried to make its name by competing more obliquely. For instance, many of its models are open-source: anyone may download and use them without explicit permission, for no charge. Others are released under the company’s own “research” licence; commercial users must pay for them, hobbyists and hackers can fool around with them freely. It often releases models with nothing but a wordless link to a BitTorrent file for download, with the full explanation coming later. This approach drew attention—and copycats. When China’s DeepSeek burst on to the scene early this year, it used the same three-part playbook.
Until recently Mistral looked likely to become collateral damage in the battle between America and China to dominate AI. With American executives arguing that users faced a choice between “democratic” or “autocratic” AI and Chinese models offering cheap performance to the geopolitically unbothered, the French firm was squeezed. Rumours of a potential sale swirled, but Mistral’s boss curtly dismissed them on live television in January. The company was heading for an IPO, he said, citing “tremendous” growth. If so, sceptics wondered, why was he spending so much time swanning around Silicon Valley?
But in February things started to turn round. Mistral released Le Chat, a paid-for ChatGPT-style assistant. The service is distinguished by its speed: building on chips from Cerebras, an American startup, it responds blazingly fast compared with the competition. Its app racked up 1m downloads in the first ten days.
It has something else in its favour: geography. “Le Chat est français”, reads one five-star review of the French version of the app, arguing that it is worth putting up with a slightly less efficient service to avoid the American and Chinese offerings. “The Americans have gone bonkers,” declared another (British) five-star review. Mistral’s list of clients suggests that better-known, if less demonstrative, users are also open to a spot of flag-waving. It is dominated by French giants like BNP Paribas, a bank, and Orange, a telecoms firm.
However, national pride alone pays no bills. Mistral’s annual recurring revenue is just €30m, only around 0.5% of its giddy valuation, according to Sifted, a tech publication. But as the number of AI models grows, and the difference between the best shrinks ever further, a spot of patriotism might be enough to keep the money coming in and the models humming.
Source: https://www.economist.com/business/2025/03/06/mistral-europes-biggest-ai-startup-is-blowing-hot
