Blackstone is weighing a fresh capital injection into Factory, an Nvidia-backed artificial intelligence coding company, in a deal that would likely value the San Francisco-based start-up at more than $3.5 billion, City AM has learned.

The New York-headquartered investment giant has been directing substantial capital toward AI firms and digital infrastructure in recent years. It is now considering participating in a new funding round for Factory, according to sources familiar with the matter.

Factory develops AI-driven autonomous agents, called "droids," which automate software coding for clients including Morgan Stanley, EY, and Nvidia. Nvidia is also an existing investor in the company.

Should the deal proceed, it would mark Factory's third funding round since September, when the company was valued at $300 million in a $50 million raise backed by investors including Nvidia and JPMorgan. Blackstone subsequently invested in Factory's Series C round in April at a $1.5 billion valuation, alongside Sequoia Capital, Khosla Ventures, and London-based 20VC.

The latest round is expected to value Factory at more than $3.5 billion, sources said.

Factory did not respond to requests for comment. Blackstone declined to comment.

Soaring AI Valuations

A deal would highlight the rapid escalation of valuations across the AI sector, as well as Blackstone's aggressive expansion into the industry. The jump from a $300 million valuation in September to more than $3.5 billion within roughly a year underscores how investors are racing to back promising AI coding start-ups, even as many remain pre-profit. Factory competes in an increasingly crowded field that includes well-funded players such as Anysphere, the maker of Cursor, alongside GitHub Copilot and a wave of newer entrants all targeting the automation of software development.

In a May blog post, Blackstone operating chief Rodney Zemmel identified companies deploying AI agents for corporate automation as one of the firm's six key focus areas, alongside content creation and software engineering.

Blackstone has also been investing heavily in what it describes as the "picks and shovels" of the AI boom, including data centres and digital infrastructure. The firm is the world's largest private owner of data centres and, in the past two months alone, has announced plans to invest approximately $30 billion in Japanese data centres and $5 billion in a new data infrastructure venture with Google.

Founded in 2023 by former Princeton students Matan Grinberg and Eno Reyes, Factory aims to compete with companies such as Anthropic and its Claude AI model through its autonomous droid technology. The start-up has been accelerating its international expansion in recent months, opening its first overseas office in London in March, followed by a location in Sydney.

Following the April funding round, Grinberg said: "Anything that can be done on a computer, can be done with a Droid." He also noted that the company had doubled its revenue every month during the six months leading up to April.