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Amazon set to invest up to $4B into AI startup Anthropic

Amazon (AMZN) has made an initial investment of $1.25 billion, according to Reuters, in the generative AI startup, Anthropic. Amazon is committed to potentially investing up to $4 billion in Anthropic, securing a minority ownership stake in the startup. Anthropic is recognized for its 'Claude' AI system, which provides assistance to users by answering their questions, similar to ChatGPT. Anthropic will leverage Amazon's resources in its development efforts, including Amazon Web Services and the company's custom chips. This investment trend aligns with the broader movement of tech giants, such as Microsoft (MSFT), Google (GOOG, GOOGL), and Meta (META), increasingly investing in artificial intelligence.

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Video transcript

- Yet another tech company is moving into the artificial intelligence space. Amazon investing $1.25 billion in Anthropic. It's a generative AI firm. And that number may rise up to $4 billion.

Now, as a part of this deal, Amazon will take a minority ownership position of the startup. Anthropic will use Amazon's custom chips to build, train, and deploy its future AI foundation models and is also committing to use Amazon Web Services, AWS, as its primary cloud provider. This coming after Microsoft reportedly invested $13 billion in OpenAI and Google has introduced its own AI products.

So, Brad, a lot to unpack here, but certainly, my first take obviously from this news, from this investment, AI has been will continue to be a priority here for Amazon. They have long been criticized just about the position and how far behind they are compared to some of their competitors, specifically Microsoft and Google and their first advancements or first mover advantage here within this space.

We're starting to get some analysts reaction to this, Scott Devitt out of Wedbush was saying that today's announcement signals a newfound urgency in Amazon's strategy here to further integrate Gen AI with AWS and certainly sees this as a potential catalyst here going forward.

- Yeah. You got a new name now to contend with. Of course, chatGPT doesn't necessarily have a name name to it, but it's talked about by grandmothers nationwide. However, you think about some of the other names that have emerged in the course of generative AI.

It has been Ernie Bot. It's been barred. It's been all of these kind of come up with them as you please and see if it sticks. But Claude is the new name that people are going to have to get used to with Anthropic. And this was really announced as one that was really based more on trust here.

And the way that they had tried to position it, at least Anthropic, as an AI rival to chatGPT, Claude capable of analyzing more words in less than a minute or at least 75,000 words in less than 60 seconds here. And so really, the speed to which that Claude and this rival here that Amazon is now invested in is being looked at as a true contender.

And now for Amazon being able to have a use case where it can show where a generative AI system like this can be such a beneficiary because of what Amazon already had in place, not just with the data that they have but with the cloud system and the speed, the latency to which that cloud system is able to handle that workload. That's going to be significant here.

You're seeing shares at least pre-market right now for Amazon. And believe, we were watching them just a moment ago just to see exactly how they are moving. They're higher by about half a percent. But all this, of course, coming off of even more of focus that Microsoft is getting here this morning too.

There was an upgrade that Microsoft got on their own artificial intelligence and generative AI plays as well here. So I think that all continuing to round out how the generative AI, at least hype phase, may be behind us, but for some of the analysts that are looking across the opportunity for them to be able to monetize this and it to flow through to their financial performance. It still is some of the Magnificent Seven that are the major beneficiaries of that. And why? Because they have the most cash to really continue to invest in this right now.

- Yeah, certainly. And it's really like you said, the AI rally, the hype may not be there anymore because it's turned into more of a show-me story. But going back to what you just briefly mentioned there with the Guggenheim note out on Microsoft, and they upgrade Microsoft. They upgraded the stock here to neutral from sell, basically saying that Gen AI is too strong to ignore.

And it's overshadowing some of the weakness within Microsoft's business when it comes to PC sales, when it comes to slowing growth in Azure, its cloud division there. So that really just points to how important AI is to this market's momentum and what we've seen play out over the last nine months.