Amazon is making its largest outside investment in its three-decade history as it looks to gain an edge in the artificial intelligence race.
The tech giant said it will spend another $2.75 billion backing Anthropic, a San Francisco-based startup that’s widely viewed as a front-runner in generative artificial intelligence. Its foundation model and chatbot Claude competes with OpenAI and ChatGPT.
The companies announced an initial $1.25 billion investment in September, and said at the time that Amazon would invest up to $4 billion. Wednesday’s news marks Amazon’s second tranche of that funding.
Amazon will maintain a minority stake in the company and won’t have an Anthropic board seat, the company said. The deal was struck at the AI startup’s last valuation, which was $18.4 billion, according to a source.
Over the past year, Anthropic closed five different funding deals worth about $7.3 billion. The company’s product directly competes with OpenAI’s ChatGPT in both the enterprise and consumer worlds, and it was founded by ex-OpenAI research executives and employees.
News of the Amazon investment comes weeks after Anthropic debuted Claude 3, its newest suite of AI models that it says are its fastest and most powerful yet. The company said the most capable of its new models outperformed OpenAI’s GPT-4 and Google‘s Gemini Ultra on industry benchmark tests, such as undergraduate level knowledge, graduate level reasoning and basic mathematics.
“Generative AI is poised to be the most transformational technology of our time, and we believe our strategic collaboration with Anthropic will further improve our customers’ experiences, and look forward to what’s next,” said Swami Sivasubramanian, vice president of data and AI at AWS cloud provider.
Amazon’s move is the latest in a spending blitz among cloud providers to stay ahead in the AI race. And it’s the second update in a week to Anthropic’s capital structure. Late Friday, bankruptcy filings showed crypto exchange FTX struck a deal with a group of buyers to sell the majority of its stake in Anthropic, confirming a CNBC report from last week.
Read more CNBC reporting on AI
What is generative AI?
The term generative AI entered the mainstream and business vernacular seemingly overnight, and the field has exploded over the past year, with a record $29.1 billion invested across nearly 700 deals in 2023, according to PitchBook. OpenAI’s ChatGPT first showcased the tech’s ability to produce human-like language and creative content in late 2022. Since then, OpenAI has said more than 92% of Fortune 500 companies have adopted the platform, spanning industries such as financial services, legal applications and education.
Cloud providers like Amazon Web Services don’t want to be caught flat-footed.
It’s a symbiotic relationship. As part of the agreement, Anthropic said it will use AWS as its primary cloud provider. It will also use Amazon chips to train, build and deploy its foundation models. Amazon has been designing its own chips that may eventually compete with Nvidia.
Microsoft has been on its own spending spree with a high-profile investment in OpenAI. Microsoft’s OpenAI bet has reportedly jumped to $13 billion as the startup’s valuation has topped $29 billion. Microsoft’s Azure is also OpenAI’s exclusive provider for computing power, which means the startup’s success and new business flows back to Microsoft’s cloud servers.
Google, meanwhile, has also backed Anthropic, with its own deal for Google Cloud. It agreed to invest up to $2 billion in Anthropic, comprising a $500 million cash infusion, with another $1.5 billion to be invested over time. Salesforce is also a backer.
Anthropic’s new model suite, announced earlier this month, marks the first time the company has offered “multimodality,” or adding options like photo and video capabilities to generative AI.
But multimodality, and increasingly complex AI models, also lead to more potential risks. Google recently took its AI image generator, part of its Gemini chatbot, offline after users discovered historical inaccuracies and questionable responses, which circulated widely on social media.
Anthropic’s Claude 3 does not generate images. Instead, it only allows users to upload images and other documents for analysis.
“Of course no model is perfect, and I think that’s a very important thing to say upfront,” Anthropic co-founder Daniela Amodei told CNBC earlier this month. “We’ve tried very diligently to make these models the intersection of as capable and as safe as possible. Of course there are going to be places where the model still makes something up from time to time.”
Amazon’s biggest venture bet before Anthropic was electric vehicle maker Rivian, where it invested more than $1.3 billion. That too, was a strategic partnership.
These partnerships have been picking up in the face of more antitrust scrutiny. A drop in acquisitions by the Magnificent Seven — Amazon, Microsoft, Apple, Nvidia, Alphabet, Meta and Tesla — has been offset by an increase in venture-style investing, according to Pitchbook.
Big Tech’s investments
AI and machine-learning investments from those seven tech companies jumped to $24.6 billion last year, up from $4.4 billion in 2022, according to Pitchbook. At the same time, Big Tech’s M&A deals fell from 40 deals in 2022 to 13 last year.
“There is a sort of paranoia motivation to invest in potential disruptors,” Pitchbook AI analyst Brendan Burke said in an interview. “The other motivation is to increase sales, and to invest in companies that are likely to use the other company’s product — they tend to be partners, more so than competitors.”
Big Tech’s spending spree in AI has come under fire for the seemingly circular nature of these agreements. By investing in AI startups, some observers, including Benchmark’s Bill Gurley, have accused the tech giants of funneling cash back to their cloud businesses, which in turn, may show up as revenue. Gurley described it as a way to “goose your own revenues.”
The U.S. Federal Trade Commission is taking a closer look at these partnerships, including Microsoft’s OpenAI deal and Google and Amazon’s Anthropic investments. What’s sometimes called “round tripping” can be illegal — especially if the aim is to mislead investors. But Amazon has said that this type of venture investing does not constitute round tripping.
FTC Chair Lina Khan announced the inquiry during the agency’s tech summit on AI, describing it as a “market inquiry into the investments and partnerships being formed between AI developers and major cloud service providers.”
Correction: This article has been updated to clarify the deals Anthropic has closed in the past year.
Check out the companies making headlines in extended trading. Microsoft — Stock in the technology behemoth climbed more than 6% on the heels of better-than-expected third-quarter results on the top and bottom line. Microsoft earned $3.46 per share on revenue of $70.07 billion, while analysts polled by LSEG were looking for a profit of $3.22 per share and $68.42 billion in revenue. Meta Platforms — Shares of the Facebook parent advanced more than 5%. Meta beat analysts’ first-quarter estimates when it reported earnings of $6.43 per share and revenue of $42.31 billion. Analysts surveyed by LSEG were expecting a profit of $5.28 per share on revenue of $41.40 billion. Meta also upped its full-year capital expenditures to $64 billion from $72 billion in order to continue investing in data centers to power artificial intelligence. Shares of Nvidia gained more than 2% on the heels of Meta’s spending plans. Amazon — Stock in the e-commerce company gained more than 2% following news that Amazon plans to invest $4 billion in buildin out its last-mile delivery network in small towns. MGM Resorts — The casino operator ticked up nearly 3% after first-quarter earnings surpassed analyst estimates. MGM reported adjusted earnings per share of 69 cents, while analysts polled by LSEG were looking for 46 cents. First-quarter revenue of $4.28 billion missed the analyst consensus that called for $4.30 billion, however. Robinhood — Shares of the trading platform pulled back less than 1% despite better-than-expected first-quarter results. Robinhood earned 37 cents per share on revenue of $927 billion. Analysts polled by LSEG were looking for 33 cents per share and $923 million in revenue. Qualcomm – Soft guidance on revenue weighed on the chipmaker’s stock, dragging it down 6%. Qualcomm sees revenue for the fiscal third quarter coming in at $10.3 billion at the midpoint. Analysts polled by LSEG sought $10.35 billion in sales. The narrow miss on the outlook overshadowed top- and bottom-line beats for the second quarter. Sprouts Farmers Market – The organic food retailer slid nearly 5%. Sprouts’ revenue of $2.24 billion in the first quarter narrowly surpassed the $2.21 billion forecasted by analysts polled by FactSet. The company’s outlook for the current quarter’s comparable store sales growth ranges from 6.5% to 8.5%, with the lower end of the band missing consensus estimates for 7.0%. —CNBC’s Darla Mercado contributed to this report.
Check out the companies making headlines in midday trading. Etsy — The e-commerce company saw shares tumbling 9%. Etsy CFO Lanny Baker said the company is “staying nimble in the face of uncertainty” around the tariff announcements and “the fluid state of consumer confidence in our core markets. Separately, Etsy posted better-than-expected revenue for the first quarter. Seagate Technology — The data storage stock surged almost 9% after the company posted strong earnings for the fiscal third quarter and offered upbeat current-quarter guidance. Seagate earned $1.90 per share, excluding items, on $2.16 billion in revenue, while analysts surveyed by FactSet anticipated $1.74 per share on $2.12 billion of revenue. Snap — Shares of the tech company lost nearly 15% after Snap declined to provide a forecast , citing macroeconomic uncertainties that could weigh on advertising demand. Snap still reported better-than-expected revenue for the first quarter. Super Micro Computer — The server maker saw its shares plunge more than 14% following weaker-than-expected preliminary results for the fiscal third quarter, which ended on March 31. Super Micro last year struggled with delayed financial filings and short-seller reports. Oddity Tech — The beauty retailer and owner of Il Makiage popped 23% after boosting its outlook . For the current fiscal year, Oddity now forecasts revenues between $790 million and $798 million, up from a prior range of $776 million to $785 million. The company’s fiscal first quarter results also came in above expectations. Oddity CFO Lindsay Drucker Mann told CNBC that the company has “a lot of offsetting abilities” to manage tariffs. Starbucks — Shares of the coffee chain tumbled nearly 7% after fiscal second-quarter results fell short of estimates on the top and bottom lines. Starbucks reported adjusted earnings of 41 cents per share on $8.76 billion of revenue. Analysts were looking for 49 cents and $8.82 billion, according to LSEG. The company said it also expected some challenges from tariffs and volatile coffee prices for the rest of its fiscal year. Brinker International — Shares of Brinker International, which owns chains such as Chili’s and Maggiano’s Little Italy, slipped 2%. The decline follows a 15% fall on Tuesday. Even as the company posted a fiscal third quarter beat and raised its full-year revenue guidance, some investors had sold the stock on fears that Brinker’s growth is unsustainable. Goldman Sachs stuck with its buy rating on the stock. Yum China — Shares slid 7% after Yum China, the fast-food company spun off from Yum Brands, reported lackluster financial results. The company posted first-quarter adjusted earnings of 77 cents per share, topping the 79 cents per share expected by analysts polled by FactSet. Revenue of $2.98 billion came in above the estimated $3.09 billion. GE HealthCare Technologies — The medical technology and pharmaceutical solutions provider rose 4% after GE HealthCare reported better-than-expected first-quarter results. The company posted adjusted earnings of $1.01 per share on revenue of $4.78 billion, while analysts polled by LSEG expected 91 cents per share in earnings and revenue of $4.66 billion. Nike — Shares dipped about 3% after the athletic apparel manufacturer received a downgrade from Wells Fargo to equal weight from overweight. The firm said that tariff headwinds and recession risks could contribute material risk to Nike’s earnings. First Solar — Shares of the solar panel manufacturer tumbled 9%. First Solar posted first-quarter earnings per share of $1.95, missing the $2.49 per share analysts polled by LSEG had called for. First Solar also guided for second-quarter and full-year earnings that were below expectations. — CNBC’s Jesse Pound, Michelle Fox Theobald, Alex Harring and Lisa Han contributed reporting.
Attendees arrive at the auditorium of the CHI Health Center during the Berkshire Hathaway annual meeting in Omaha, Nebraska, US, on Saturday, May 6, 2023.
David Williams | Bloomberg | Getty Images
For decades, Berkshire Hathaway‘s annual meeting — Warren Buffett’s “Woodstock for Capitalists” — has attracted foreign investors traveling to Omaha, Nebraska, sometimes from thousands of miles away. This year, their international trip has a new wrinkle to it.
Xin Jin, a Chinese investor in Guangzhou, wanted to pay his second visit to Omaha this May but international travel in the current political climate worried him. In 2012, he poured half his assets in to Berkshire’s stock, which became one of the most profitable names in his portfolio.
“I really want to go to Omaha this year,” Jin said. “I admire Buffett and I’m very touched by him.”
A consumer-focused Chinese investor in Shanghai who didn’t want to be named but who has attended the annual meeting three times, also said the hostile political environment kept him from traveling this year. Another Chinese shareholder noted there are fewer third-party agencies organizing trips to Omaha this time. One shareholder in Jakarta, Indonesia who attended last year decided to stay home, saying he’s concerned about “unnecessary and unfounded issues with customs.”
This year’s meeting comes after President Donald Trump launched a global trade war in the early days of his second term, intensifying political tensions between the U.S. and other nations. China, in particular, has issued a risk alert for Chinese tourists travelling to the U.S., citing recent “deterioration of China-U.S. economic and trade relations and the domestic security situation in the U.S.”
“What I noticed the last couple of years, the demographics of the shareholders tilted a lot more towards international — shareholders being there for the first time, largely international and very young,” said David Kass, a finance professor at the University of Maryland, who once held private lunches for his students and Buffett.
Berkshire’s annual gathering can attract as many as 40,000 people to the Cornhusker State for a unique opportunity to hear from Buffett, his designated successor Greg Abel and Berkshire’s insurance chief, Ajit Jain. The Q&A session will be broadcast on CNBC and webcast in English and Mandarin.
Buffett, 94, has long acknowledged the growing international representation at his annual gathering. In fact, he and his late partner Charlie Munger used to hold special receptions for those traveling from outside North America. He eventually ended the event as the number of foreign attendees grew.
“Our count grew to about 800 last year, and my simply signing one item per person took about 2 1⁄2 hours,” Buffett said in annual letter in 2009. “Since we expect even more international visitors this year, Charlie and I decided we must drop this function. But be assured, we welcome every international visitor who comes.”
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