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Amazon It is making its largest outside investment in its three-decade history, as it looks to gain an advantage in the artificial intelligence race
The tech giant said it will spend another $2.75 billion to support Anthropic, a San Francisco-based startup widely seen as a leader in generative artificial intelligence. Its core model and chatbot Cloud competes with OpenAI and ChatGPT.
The two companies announced an initial investment of $1.25 billion in September, and said at the time that Amazon would invest up to $4 billion. Wednesday's news represents the second tranche of this funding for Amazon.
Amazon will retain a minority stake in the company and will not have a seat on Anthropic's board, the company said. The deal was struck at the AI startup's last valuation, which was $18.4 billion, according to a source.
Over the past year, Anthropic closed five different financing deals worth approximately $7.3 billion. The company's product competes directly with OpenAI's ChatGPT in both the enterprise and consumer worlds, and was founded by former OpenAI research executives and employees.
News of Amazon's investment comes weeks after Anthropic debuted Claude 3, its latest suite of AI models that it says are its fastest and most powerful yet. The company said the most capable models of its new models outperformed OpenAI's GPT-4 and GoogleGemini Ultra tests industry standard tests, such as undergraduate-level knowledge, graduate-level reasoning, and basic mathematics.
“Generative AI is poised to be the most transformative technology of our time, and we believe our strategic collaboration with Anthropic will further improve our customers’ experiences, and we look forward to what’s next,” said Swami Sivasubramanian, Vice President of Data and Artificial Intelligence at Generative AI. AWS cloud provider.
Amazon's move is the latest in a spending drive among cloud providers to stay ahead in the AI race. It is the second update in a week to Anthropic's capital structure. Late Friday, bankruptcy filings showed that cryptocurrency exchange FTX struck a deal with a group of buyers to sell the majority of its stake in Anthropic, confirming a CNBC report last week.
What is generative artificial intelligence?
The term generative AI entered the mainstream and business jargon overnight, and the field has seen significant development over the past year, with a record $29.1 billion invested across nearly 700 deals in 2023, according to PitchBook. OpenAI's ChatGPT first demonstrated the technology's ability to produce human-like language and creative content in late 2022. Since then, OpenAI said more than 92% of Fortune 500 companies have adopted the platform, covering industries such as financial services, legal applications and education. .
Cloud providers, like Amazon Web Services, don't want to get stuck.
It's a symbiotic relationship. As part of the agreement, Anthropic said it will use AWS as its primary cloud provider. It will also use Amazon chips to train, build and deploy its core models. Amazon is designing its own chips that it may eventually compete with Nvidia.a
Microsoft It has been on a spending spree of its own with a high-profile investment in OpenAI. Microsoft's OpenAI bet reportedly jumped to $13 billion as the startup's valuation surpassed $29 billion. Microsoft Azure is also OpenAI's exclusive provider of computing power, which means the startup is successful and new business is flowing back into Microsoft's cloud servers.
Meanwhile, Google has also backed Anthropic, through its own deal to buy Google Cloud. It agreed to invest up to $2 billion in Anthropic, including a $500 million cash injection, with another $1.5 billion invested over time. Salesforce is also supportive.
Anthropic's new model lineup, announced earlier this month, marks the first time the company has offered “multimedia,” or adding options like photo and video capabilities to generative AI.
But multimodality and increasingly complex AI models also bring more potential risks. Google recently shut down its AI image generator, part of its Gemini chatbot, after users discovered historical errors and questionable responses, which were widely circulated on social media.
Anthropic's Claude 3 does not create images. Instead, it only allows users to upload images and other documents for analysis.
“Of course there is no perfect model, and I think it's very important to say that up front,” Anthropic co-founder Daniela Amodei told CNBC earlier this month. “We've tried hard to make these crossover models to be as capable and safe as possible. And of course there will be places where the model still makes something happen from time to time.”
The biggest bet on Amazon's venture before Anthropic was the electric car maker RivianIt invested more than $1.3 billion. This was also a strategic partnership
These partnerships have begun to improve in the face of increased antitrust scrutiny. Decrease in acquisitions by the seven great companies – Amazon, Microsoft, applenvidia alphabet, dead And Tesla – Offset by an increase in adventure-style investing, according to Pitchbook.
Investments of major technology companies
AI and machine learning investments from these seven tech companies jumped to $24.6 billion last year, compared to $4.4 billion in 2022, according to Pitchbook. Meanwhile, M&A deals for big tech companies fell from 40 deals in 2022 to 13 last year.
“There is a kind of paranoid drive to invest in potential disruption,” Brendan Burke, an analyst at Pitchbook AI, said in an interview. “Another motivation is to increase sales, and invest in companies that are more likely to use the other company's product – they tend to be partners, more so than competitors.”
Big Tech's AI spending spree has come under fire for the circular nature of these agreements. By investing in AI startups, some observers, including Benchmark's Bill Gurley, have accused the tech giants of funneling money into their cloud businesses, which in turn may show up as revenue. Gurley described it as a way to “make your own revenue.”
The US Federal Trade Commission is taking a closer look at these partnerships, including Microsoft's OpenAI deal and Google and Amazon's humanitarian investments. What is sometimes called “back-and-forth” can be illegal – especially if the goal is to mislead investors. But Amazon said this type of venture investment does not constitute default.
FTC Chairwoman Lena Khan announced the investigation during the agency's AI Tech Summit, calling it a “market investigation into the investments and partnerships being formed between AI developers and major cloud providers.”
Correction: This article has been updated to clarify which deals Anthropic closed in the past year.
