Yahoo Finance Amazon’s $4 billion splash into the AI wars
The AI wars continue to rage on. The latest turn comes as Amazon (AMZN) on Monday announced that it’s investing $4 billion in San Francisco-based AI company Anthropic. It’s a move akin to Microsoft’s (MSFT) $10 billion investment in ChatGPT maker OpenAI, and puts Amazon right at the center of the AI explosion that continues to sweep across Silicon Valley and beyond.
Founded in 2021 by former OpenAI employees, Anthropic is focused on building safe and reliable AI systems. But Amazon didn’t just unload a dump truck full of hundred-dollar bills on Anthropic’s doorstep to be a part of the AI conversation.
The tech giant is making the move for two big reasons: to better compete against rivals Microsoft and Google parent Alphabet in the cloud industry, and to bring generative AI to its Amazon.com storefront.
“It's now more clear that [Amazon] can't miss out,” explained Deepwater Asset Management managing partner Gene Munster. “They're not doing it just because Google and Microsoft are making investments. They're doing it because those investments and the progress is so substantial that they need to move.”
Amazon's AI push
Amazon’s investment in Anthropic isn’t the first time the companies have come together. Anthropic already provides its Claude large language models through Amazon Web Services (AWS), giving enterprise customers the ability to build generative AI offerings for their users.
So why would Amazon spend $4 billion on a company that it already has a relationship with? Because doing so means Amazon’s customers will get greater access to Anthropic’s AI arsenal, including the ability to “fine-tune” and “customize” models, Anthropic said in a statement.
It also means that Amazon can build on the number of foundation models, including large language models it offers through its Bedrock platform. A kind of one-stop shop for AWS customers, Bedrock gives users access to the foundation models that power generative AI platforms.
In other words, Bedrock is where AWS customers can go to pick the kind of model they want from the likes of Anthropic, Stability AI, and even Amazon’s own models to build generative AI products into their own software.
“Whereas Microsoft is primarily sourcing its large language models through its partnership with OpenAI, Amazon has some native models in addition to this partnership as part of Bedrock and other partnerships that are part of the broader AWS Marketplace,” explained Forrester senior analyst Rowan Curran.
“This is a reemphasizing of Amazon's position that they are a player in the generative AI market, and that they are doing it in a kind of multipronged way,” he added.
The move will also help benefit Amazon in its battle against rivals Microsoft and Google (GOOG, GOOGL) in the cloud computing market. By making such a splashy announcement with Anthropic, Amazon is showing that it’s not going to let its biggest competitors steal away its customers’ attention.
It’ll also help allay investor concerns that Microsoft and Google, not to mention other players in the space like IBM, are moving faster than Amazon.
“Amazon’s prioritization of AI has been an area of investor debate in recent quarters, and we think today’s announcement signals a newfound urgency in Amazon’s strategy to further integrate generative AI into its AWS suite of services,” Wedbush analyst Scott Devitt wrote in a note to investors Monday.
“The agreement has the potential to accelerate adoption and deployment of additional generative AI capabilities to AWS customers and should ease investor concerns that Amazon has been less proactive than its peers in its approach to generative AI, in our view,” he added.
Generative AI and shopping
AWS isn’t the only way Amazon will benefit from its deeper dive into generative AI. The company could also use technology from Anthropic and its own AI knowledge to improve the consumer shopping experience on Amazon.com.
Imagine being able to search for products you need for specific occasions or life events, rather than individual goods.
“Instead of going to Amazon and saying I'm looking for a blue sport coat, you would go and say I'm going to a wedding next weekend and need a few things including a blue sport coat. Then there's the natural conversation that Anthropic will power [that] will be part of discovery,” Munster explained.
Amazon is already using generative AI via its Just Walk Out technology, which charges customers as they leave a store without having to go to a register, at concession stands at the Seattle Seahawks’ Lumen Field. The company is also giving sellers access to generative AI technology to write product descriptions.
And with companies like Google and Microsoft bringing generative AI to their respective search offerings, it’s not too far of a stretch to imagine that the e-commerce giant will add the technology to its product search capabilities.
It doesn’t seem like there’s an end in sight to the AI wars just yet.
Daniel Howley is the tech editor at Yahoo Finance. He's been covering the tech industry since 2011. You can follow him on Twitter @DanielHowley.
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