Amazon/AI: tech arms race continues with Anthropic investment

Amazon has lagged behind tech rivals when it comes to the generative artificial intelligence arms race under way in Silicon Valley. That might be surprising given the company’s longstanding investments in cloud computing and machine learning.

But the tech heavyweight has finally come off the sidelines. It has agreed to invest as much as $4bn in Anthropic, a rival to OpenAI — the group behind ChatGPT.

The deal, announced on Monday, is light on details. Under the terms of the agreement, Amazon will invest an initial $1.25bn for a minority stake in the company, with the potential to invest up to $4bn. In return, Anthropic will use Amazon as its primary cloud computing platform. It will also use Amazon’s AI chips to create its models.

This will not put Amazon on equal footing overnight with generative AI leaders Google and Microsoft. But longer term, the deal offers a good fit with Amazon’s chipmaking ambitions. The ecommerce group wants to position its Trainium and Inferentia chips as credible alternatives to Nvidia’s processors for the training and running of generative AI models.

These are expensive and in short supply. For Amazon, getting Anthropic to use its chips to train its AI models is akin to a second-tier sportswear company paying a celebrity athlete plenty to endorse its products.

This could also be good news for Amazon Bedrock. This service, within its AWS cloud computing business, allows developers to build applications using generative AI.

Intriguingly, the valuation and size of Amazon’s stake will be set at a later funding round. But that may not matter so much. Amazon can easily afford to bet on Anthropic. AWS alone earned the group almost $23bn in operating profit last year.

Monday’s agreement also reveals that Amazon is getting more serious about generative AI. That appeared to please investors. Amazon’s market value climbed about $21bn on the day. That looks like a pretty handsome return on a $1.25bn initial investment.