Amazon is set to make the biggest external investment in its 30-year history, as it seeks to secure a leading position in the fast-growing field of artificial intelligence (AI). The Seattle-based e-commerce behemoth has announced its intention to inject an additional $2.75 billion into Anthropic, the San Francisco start-up recognized as a leader in the development of generative AI technologies. Competing with the likes of OpenAI and ChatGPT, Anthropic is particularly renowned for its foundation model and AI-powered chatbot, Claude.
In a joint statement, the two companies revealed that an initial investment of $1.25 billion had been made in September. At the time, Amazon had signaled its intention to invest as much as $4 billion in the AI developer, and this latest funding constitutes the second installment towards that goal.
According to details of the deal shared by Amazon, it will retain a minority interest in Anthropic, but will not occupy a seat on the AI firm’s board. The latest round of funding was agreed upon based on Anthropic’s last valuation, which stood at $18.4 billion, an anonymous source has revealed.
Anthropic has completed five funding rounds in the past year, amassing approximately $7.3 billion. The company, established by former OpenAI research executives and staff members, has products that serve as direct competitors to OpenAI’s ChatGPT in the enterprise and consumer realms.
The news of Amazon’s substantial investment follows closely on the heels of the launch of Claude 3, the latest set of AI models from Anthropic. The company asserts that these models are its most rapid and potent to date. According to Anthropic, these models have outperformed industry rivals, such as OpenAI’s GPT-4 and Google’s Gemini Ultra, on various industry benchmark tests, including undergraduate-level knowledge, graduate-level reasoning, and elementary mathematics.
Swami Sivasubramanian, the Vice President of Data and AI at AWS Cloud Provider, claimed, “Generative AI is on track to become the most transformative technology of our era. We hope that our strategic partnership with Anthropic will continue to enhance our customers’ experiences and eagerly anticipate what lies ahead.”
Amazon’s massive investment represents another stride in a spending spree by various cloud providers to stay at the forefront of the AI race. Meanwhile, modifications to Anthropic’s capital structure have not ceased. In late filings last Friday, it was revealed that cryptocurrency exchange FTX reached an agreement with a group of buyers. This agreement enables the sale of most of FTX’s stake in Anthropic, confirming a written CNBC report from the previous week.
Generative AI refers to a subset of artificial intelligence technologies capable of creating human-like language and other forms of creative content. It has witnessed an explosion of interest over the past year, with a record-breaking $29.1 billion invested in nearly 700 deals in 2023, according to data from PitchBook. OpenAI’s product, ChatGPT, was one of the first to showcase the potential of generative AI in late 2022, and since then, over 92% of Fortune 500 companies across diverse sectors, including financial services, legal and education, have adopted the platform.
Cloud providers like Amazon Web Services (AWS) don’t want to be left behind in this race and are actively investing in start-ups providing such services, such as Anthropic, which has agreed to use AWS as its primary cloud provider. Anthropic will also utilize Amazon chips in the creation, training and deployment of its AI models.
Parallel to this, Microsoft has invested heavily in OpenAI, while Google has backed Anthropic through a deal with Google Cloud. Salesforce is also one of the backers.
Meanwhile, Anthropic has unveiled its new model suite, one that offers multimodality, or extended options such as photo and video capabilities for AI. However, this advancement poses potential risks as was experienced by Google when it took down its AI image generator due to issues pertaining to historical inaccuracies and inappropriate responses.
Anthropic is mindful of these perils; its Claude 3 model only permits image uploading and document analysis and doesn’t generate images. Company co-founder Daniela Amodei acknowledges that no model is perfect and that the company strives towards balancing capability with safety.
The trend of partnerships with start-ups by large tech companies has been gaining momentum recently amidst increased antitrust scrutiny, and has compensated for the noticeable drop in acquisitions. AI investments by these tech giants amounted to $24.6 billion in 2023, a sharp rise from the $4.4 billion in 2022, according to PitchBook. This has raised concerns about a potentially circular nature of these agreements, attracting scrutiny from the US Federal Trade Commission. However, Amazon has defended the practice, stating that such venture investments do not amount to round tripping.
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