Amazon's largest outside investment in its three-decade history
In a significant move, Amazon announced a substantial investment of $2.75 billion in Anthropic, an artificial intelligence startup, marking the completion of a $4 billion deal initiated late last year. This is Amazon's largest outside investment in its three-decade history, underlining its commitment to gaining an edge in the rapidly evolving AI race. Anthropic, the brainchild of former OpenAI researchers, is the developer behind the chatbot Claude, which competes directly with OpenAI's ChatGPT.
The term generative AI has exploded over the past year, with a record $29.1 billion invested across nearly 700 deals in 2023, according to PitchBook. OpenAI's ChatGPT first showcased the tech's ability to produce human-like language and creative content in late 2022, and since then, more than 92% of Fortune 500 companies have adopted the platform, spanning industries such as financial services, legal applications, and education.
This strategic investment by Amazon underscores the fierce competition in the generative AI landscape, particularly with its rival Microsoft's partnership with OpenAI. Microsoft's OpenAI bet has reportedly jumped to $13 billion as the startup's valuation has topped $29 billion. Amazon's own offering, Bedrock, launched in April, allows users of Amazon Web Services to develop generative AI applications.
As part of the agreement, Anthropic committed to using Amazon Web Services as its primary cloud provider and utilizing Amazon's specialized computing chips, including AWS Trainium. Swami Sivasubramanian, vice president of Data and AI at AWS, emphasized the potential of Anthropic's visionary work in generative AI, particularly with the introduction of its latest Claude 3 family of models. These new models outperformed OpenAI's GPT-4 and Google's Gemini Ultra on industry benchmark tests.
Google has also backed Anthropic, with its own deal for Google Cloud, agreeing to invest up to $2 billion in the startup. Salesforce is another notable backer. However, the increasing complexity of AI models also leads to potential risks, as seen with Google's recent decision to take its AI image generator offline due to historical inaccuracies and questionable responses.
Amazon's investment in Anthropic is part of a broader trend of Big Tech's spending spree in AI. AI and machine-learning investments from the Magnificent Seven — Amazon, Microsoft, Apple, Nvidia, Alphabet, Meta, and Tesla — jumped to $24.6 billion last year, up from $4.4 billion in 2022, according to Pitchbook. This increase in venture-style investing has offset a drop in acquisitions by these companies, which fell from 40 deals in 2022 to 13 last year.
The U.S. Federal Trade Commission is taking a closer look at these partnerships, including Microsoft's OpenAI deal and Google and Amazon's Anthropic investments, to ensure they do not constitute illegal "round tripping" aimed at misleading investors.
As Amazon continues to expand its foothold in the AI domain, its strategic investments in startups like Anthropic signal its intent to stay at the forefront of technological innovation and drive future growth in this rapidly evolving sector. With shares hovering between $170 and $180 in recent weeks, Amazon's stock has gained about 20% year-to-date, showcasing steady growth amidst market fluctuations.