Amazon’s Biggest Venture Investment Yet: $2.75 Billion Spent on AI Startup Anthropic

 

Amazon is making its largest outside investment in its three-decade history by investing $2.75 billion in Anthropic, a San Francisco-based startup focused on generative artificial intelligence. Amazon will maintain a minority stake in the company and won’t have a board seat. Anthropic has already closed $7.3 billion in funding deals over the past year and its product competes with OpenAI’s ChatGPT. The recent investment follows the announcement of Anthropic’s new AI models suite, Claude 3, which the company claims outperformed industry benchmarks.

Generative AI has rapidly gained popularity, with a record $29.1 billion invested across nearly 700 deals in 2023. OpenAI’s ChatGPT has been widely adopted by various industries, and cloud providers like Amazon Web Services are ensuring they are equipped with the latest AI technologies to stay competitive. Anthropic has agreed to use AWS as its primary cloud provider and Amazon chips for training and deployment of its foundation models. In a symbiotic relationship, cloud providers are investing in AI startups to ensure their success benefits their cloud services.

Microsoft has made a high-profile investment in OpenAI, with a reported total investment of $13 billion. Microsoft’s Azure is the exclusive provider of computing power for OpenAI, allowing the success of the startup to flow back to Microsoft’s cloud servers. Google has also invested in Anthropic through Google Cloud, with a deal totaling up to $2 billion. Salesforce is also a backer of Anthropic. The partnerships between tech giants and AI startups are seen as strategic moves to stay ahead in the AI race and drive innovation.

Anthropic’s latest model suite includes multimodality, allowing users to incorporate photo and video capabilities into generative AI. However, more complex AI models can pose additional risks, as seen when Google took its AI image generator offline due to historical inaccuracies. Anthropic’s Claude 3 focuses on text-based AI and does not generate images. The company aims to balance capability with safety in its models, acknowledging that there may still be areas where the model makes mistakes.

Amazon’s investment in Anthropic follows a strategic partnership with electric vehicle maker Rivian, where it invested more than $1.3 billion. Amid increasing antitrust scrutiny, major tech companies have shifted towards venture-style investing over acquisitions. Big Tech companies’ AI and machine-learning investments reached $24.6 billion last year, while M&A deals fell significantly. Critics have raised concerns about the circular nature of investments in AI startups, with some suggesting it could lead to misleading revenue reporting.

The U.S. Federal Trade Commission is investigating these partnerships, particularly focusing on Microsoft’s OpenAI deal and Google and Amazon’s investments in Anthropic. The practice of investing in potential disruptors to stay ahead in the AI race has raised questions about the motives behind these partnerships. Amazon has defended its venture investments, stating that they do not constitute round-tripping. The inquiry by the FTC aims to ensure transparency and fair practices in the rapidly evolving AI landscape.