AWS

Amazon Invests $4B in AI Model Developer Anthropic

Amazon has invested $4 billion in model developer Anthropic, with Amazon Web Services (AWS) becoming its primary cloud provider. This follows Google’s $400 million earlier investment in Anthropic, indicating a possible shift in alliances. The exact terms of the deal, valuation, and revenue-sharing details were undisclosed.

Analysis

The investment positions Amazon as Anthropic’s largest shareholder, potentially paving the way for future acquisitions or profit-sharing agreements. This signals the growing importance of incumbents in the AI field due to the substantial investment required for large-language models (LLMs).

The move is unusual for AWS, which has historically avoided equity-for-business deals that competitors like Microsoft Azure and Google Cloud have used to secure business. However, the rise of AI and the success of OpenAI’s ChatGPT has threatened AWS’s dominance. As a result, AWS is now adopting strategies similar to its competitors to stay competitive in the evolving cloud industry.

AWS’s growth has also slowed, with revenues expanding only 12% in the second quarter, compared to 33% the previous year, while Google Cloud and Azure reported 28% and 26% growth, respectively. This shift in strategy reflects the growing competitive pressure in the cloud industry and the need for established players like AWS to invest in startups to secure business and innovation.

Unlike Amazon’s competitors, which have developed their own online chatbots and LLM-based tools, Amazon is providing tools for other companies and developers to build their chatbots and AI technologies. This investment allows Amazon to expand its influence in AI while also boosting its cloud computing business. The exact stake Amazon will acquire in Anthropic remains undisclosed, but it signifies Amazon’s commitment to staying at the forefront of AI innovation.

This development further intensifies the competition between major tech giants, particularly between Microsoft and other players, with Amazon making a significant AI bet. This is a strong move for Amazon.

Disclosure: The author is an industry analyst, and NAND Research an industry analyst firm, that engages in, or has engaged in, research, analysis, and advisory services with many technology companies, which may include those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.