It looks to me like Google really wants to build a monopoly on the best AI people in the world, and is willing to pay out the nose to do it. Given that we're starting to get to the point where AI is going to be useful in a lot of fields, I think it's actually a really good strategy. No one competent out there to build a good competitor to completely autonomous self-driving cars at another company, for example, which will give Google a de facto monopoly on the tech behind something that almost everyone is going to want in their cars asap.
Not to mention the enormous number of innovations they'll likely be able to churn out. Hopefully it's like an AI focused PARC, but with a competent tech company at the helm :-)
And the update to the article says they were competing with Google, Facebook, Baidu... could be google was getting rid of the competition for talent; and gaining ability to attract more talent.
Though if they're expected to do wonderful things, and they've been doing things for years... it seems a certainty that they have already done some of those wonderful things. And hence have something concrete worth acquiring. Which would explain the valuation.
Not to mention the enormous number of innovations they'll likely be able to churn out. Hopefully it's like an AI focused PARC, but with a competent tech company at the helm :-)