In an attempt to get an advantage in the fight against artificial intelligence, Amazon is making the biggest outside investment it has made in its thirty years of existence.
The internet behemoth said that it will invest an additional $2.75 billion in Anthropic, a San Francisco-based business that is considered a leader in the field of generative artificial intelligence. OpenAI and ChatGPT are competitors of its foundation model and chatbot, Claude.
In September, the firms declared their first investment of $1.25 billion, with Amazon committing to contribute up to $4 billion at that time. The announcement on Wednesday represents the second fundraising round for Amazon.
The firm said that Amazon would continue to own a minority position in the business and will not have a seat on the Anthropic board. According to a source, the agreement was reached at the AI startup’s previous value of $18.4 billion.
Anthropic has concluded five investment rounds totaling around $7.3 billion in the last year. The firm was created by former research leaders and workers of OpenAI, and its product is a direct competitor of OpenAI’s ChatGPT in both the corporate and consumer markets.
The announcement of the Amazon investment comes a few weeks after Anthropic unveiled Claude 3, its most recent set of AI models, which the company claims to be its quickest and most potent to yet. The most proficient of the company’s new models, according to industry standard tests including bachelor level understanding, graduate level reasoning, and fundamental mathematics, surpassed Google’s Gemini Ultra and OpenAI’s GPT-4.
Vice president of data and AI at AWS cloud provider Swami Sivasubramanian stated, “We believe our strategic collaboration with Anthropic will further improve our customers’ experiences and look forward to what’s next.” “Generative AI is poised to be the most transformational technology of our time.”
The latest action by cloud providers in a spending frenzy to maintain their lead in the AI race is that of Amazon. Additionally, this is Anthropic’s second capital structure modification in as many weeks. Confirming a story from CNBC last week, crypto exchange FTX reached an agreement with a group of bidders to sell the bulk of its share in Anthropic, according to bankruptcy paperwork filed late on Friday.
According to PitchBook, the area of generative AI has seen explosive growth in the last year, with a record $29.1 billion spent across almost 700 transactions in 2023. The word suddenly entered the mainstream and corporate language overnight. In late 2022, OpenAI’s ChatGPT first demonstrated the technology’s capacity to generate original material and language like that of a person. Since then, the platform has reportedly been used by more than 92% of Fortune 500 businesses, including those in the financial services, legal, and educational sectors.
Cloud service companies such as Amazon Web Services want to avoid being unprepared.
The connection is symbiotic. Anthropic said that it would utilize AWS as its main cloud provider in accordance with the agreement. Additionally, it will train, construct, and implement its foundation models using Amazon chips. Amazon has been working on creating chips of its own that might one day take on Nvidia.
Microsoft made a well-publicized investment in OpenAI as part of their own spending binge. Given that the startup’s value has surpassed $29 billion, Microsoft’s OpenAI wager is said to have increased to $13 billion. As OpenAI’s only supplier of processing power, Microsoft’s Azure cloud servers benefit from the startup’s success and subsequent ventures.
Google, on the other hand, has supported Anthropic as well via a partnership with Google Cloud. It committed to investing a maximum of $2 billion in Anthropic, which would include a $500 million immediate injection and an additional $1.5 billion to be spent gradually. Another supporter is Salesforce.
With the release of its new model suite earlier this month, Anthropic introduced “multimodality,” or the ability to add features to generative AI such as picture and video capabilities.
However, multimodality also brings with it greater potential hazards due to the increasingly complicated AI models. Google recently disabled its AI picture generator, which was a component of their Gemini chatbot, when consumers found historical errors and dubious answers that went viral on social media.
Claude 3 from Anthropic does not produce photos. Rather, users are limited to uploading papers and photographs for examination.
Anthropic co-founder Daniela Amodei said to CNBC earlier this month, “Of course no model is perfect, and I think that’s a very important thing to say upfront.” We have worked really hard to create models that are as competent and safe as feasible. Naturally, there will be instances when the model sometimes fabricates information.
Prior to Anthropic, Amazon spent over $1.3 billion in the electric car manufacturer Rivian, making it its largest investment. That was a strategic alliance as well.
The number of these collaborations has increased as antitrust enforcement has increased. According to Pitchbook, a decline in acquisitions by the Magnificent Seven (Amazon, Microsoft, Apple, Nvidia, Alphabet, Meta, and Tesla) has been counterbalanced by a surge in venture-style funding.
According to Pitchbook, the seven tech giants increased their expenditures in AI and machine learning to $24.6 billion last year from $4.4 billion in 2022. Big Tech’s M&A transactions decreased concurrently, from 40 in 2022 to 13 last year.
According to Pitchbook AI expert Brendan Burke, investing in prospective disruptors might be motivated by a sense of paranoia. “Investing in businesses that are likely to use the other company’s product serves as an additional incentive to increase sales; these businesses are typically partners rather than rivals.”
Because these agreements seem to be circular, Big Tech’s AI investment binge has drawn criticism. Some critics, such as Bill Gurley of Benchmark, have charged the tech giants of diverting money from their investment in AI companies back into their cloud services, which may potentially generate income. It’s a means to “goose your own revenues,” according to Gurley.
The U.S. Federal Trade Commission is closely examining these collaborations, such as the OpenAI agreement between Microsoft and the Anthropometric investments made by Google and Amazon. Sometimes referred to as “round tripping,” this practice may be unlawful, particularly if the intention is to deceive investors. However, according to Amazon, this kind of venture capital does not qualify as roundtripping.
During the FTC’s AI tech event, Chair Lina Khan made the announcement and said that the investigation was a “market inquiry into the investments and partnerships being formed between AI developers and major cloud service providers.”
SOURCE: NBC NEWS
