Achi news desk-
Amazon is making its largest outside investment in its three-decade history as it seeks to gain an edge in the artificial intelligence race.
The tech giant said it will spend another $2.75 billion to back Anthropic, a San Francisco-based startup widely seen as a front-runner in generative artificial intelligence. Its base model and chatbot Claude competes with OpenAI and ChatGPT.
The 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 marks Amazon’s second tranche of that funding.
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 of $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 the enterprise and consumer worlds, and was founded by former OpenAI executives and research workers.
The news of Amazon’s investment comes weeks after Anthropic debuted Claude 3, its latest series of AI models it says is its fastest and most powerful yet. The company said the most capable of its new models outperform GPT-4 and OpenAI Google‘s Gemini Ultra on industry benchmark tests, such as undergraduate-level knowledge, graduate-level reasoning and basic math.
“Productive AI is poised to be the most transformative technology of our time, and we believe our strategic collaboration with Anthropic will further enhance our customers’ experiences, and look forward to what’s next,” said Swami Sivasubramanian, vice- president of data and AI at cloud provider AWS.
Amazon’s move is the latest in a spending blitz among cloud providers to stay ahead of the AI ​​race. And this is the second update in a week to Anthropic’s capital structure. Late Friday, a bankruptcy filing showed that crypto exchange FTX had struck a deal with a group of buyers to sell the majority of its stake in Anthropic, confirming a CNBC report from last week.
The term generative AI entered the mainstream and business vernacular seemingly overnight, and the field has exploded in 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 has said that 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 be caught flat.
It’s a symbiotic relationship. As part of the deal, Anthropic said it will use AWS as its primary cloud provider. It will also use Amazon chips to train, build and deploy its base models. Amazon has been designing its own chips that could eventually compete with them Nvidia.
Microsoft has been on its own spending spree with a high-profile investment in OpenAI. Microsoft’s OpenAI bet has reportedly jumped to $13 billion as the startup’s valuation reached $29 billion. Microsoft’s Azure is also OpenAI’s exclusive provider of computing power, meaning the success of the startup and new business flows back to Microsoft’s cloud servers.
Meanwhile, Google has also backed Anthropic, with its own deal for Google Cloud. It agreed to invest up to $2 billion in Anthropic, including a cash infusion of $500 million, with another $1.5 billion to be invested over time. Salesforce is also a supporter.
Anthropic’s new model series, announced earlier this month, marks the first time the company has offered “multimode,” or adding options like photo and video capabilities to productive AI.
But multimodality, and increasingly complex AI models, also lead to more potential risks. Google recently took its AI image generator, part of its Gemini chatbot, offline after users discovered historical inaccuracies and questionable responses, which circulated widely on social media.
Claude 3 Anthropic does not produce images. Instead, it allows users to upload images and other documents for analysis only.
“Of course no model is perfect, and I think that’s a very important thing to say up front,” Anthropic co-founder Daniela Amodei told CNBC earlier this month. “We have tried very diligently to make these models as capable and as safe a crossover as possible. Of course there will be places where the model still makes something up from time to time.”
Amazon’s biggest venture bet before Anthropic was an electric vehicle maker Rivian, where he invested more than $1.3 billion. That was also a strategic partnership.
These partnerships have been emerging in the face of increased antitrust scrutiny. A drop in acquisitions by the Magnificent Seven – Amazon, Microsoft, An appleNvidia, Alphabet, Meta a Tesla – offset by an increase in venture capital investment, according to Pitchbook.
AI and machine learning investments by those seven tech companies jumped to $24.6 billion last year, up from $4.4 billion in 2022, according to Pitchbook. At the same time, Big Tech M&A deals fell from 40 deals in 2022 to 13 last year.
“There’s kind of a paranoid incentive to invest in potential disruptors,” Pitchbook AI analyst Brendan Burke said in an interview. “The other motivation is to increase sales, and to invest in companies that are likely to use the other company’s product — they tend to be partners, more so than competitors.”
Big Tech’s spending spree in AI has been fueled by the seemingly cyclical nature of these deals. By investing in AI startups, some observers, including Benchmark’s Bill Gurley, have accused the tech giants of giving money back to their cloud businesses, which in turn could appear as revenue. Gurley is described it’s a way of “knowing 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 Anthropic investments. What is sometimes called “round tripping” can be illegal — especially if the goal is to mislead investors. But Amazon has said that this type of venture investment is not a stumbling block.
FTC Chairwoman Lina Khan announced the investigation during the agency’s technology summit on AI, describing it as “a market investigation into the investments and partnerships being formed between AI developers and major cloud service providers.”
