Amazon doubles down on AI with a new $4 billion bet on Anthropic

Amazon is doubling its wager on AI, with another $4 billion investment in Anthropic, bringing its total stake to $8 billion. It follows a $1.25 billion investment in September and an earlier investment of $2.75 billion, showcasing Amazon’s growing reliance on Anthropic to bolster its AI arsenal.

If this sounds familiar, it’s because it echoes Microsoft’s playbook with OpenAI—a move that cemented ChatGPT as a household name. With the new funding, the ChatGPT rival is reportedly targeting $40 billion in its latest round.

This move comes at a critical moment in the AI space, where fierce competition is driving partnerships between cloud giants and AI developers. Like we saw with the Microsoft-OpenAI deal, Amazon’s strategy isn’t just about pumping money into the next big thing in AI, it’s about securing the hardware and infrastructure to power the next wave of its advancements.

As part of this deal, Amazon Web Services (AWS) will become Anthropic’s "primary training partner." The deal will also see Anthropic using Amazon’s custom-designed Trainium and Inferentia chips. These chips, designed for training and running AI models are expected to challenge Nvidia’s stranglehold on the AI hardware market.

Furthermore, Anthropic’s work with Amazon goes beyond infrastructure. Reports suggest that Anthropic has been collaborating with Amazon to develop a revamped version of Alexa, using its Claude language model. Early tests showed Claude outperforming Amazon’s in-house AI, promising a more conversational and natural voice assistant.

The startup is now at the heart of Amazon’s battle to compete with Microsoft and Google, both of which have staked billions in their own AI partnerships. Microsoft has invested over $13 billion in OpenAI, while Google has also committed $2 billion to Anthropic.

The scale of these investments reflects the skyrocketing costs of AI development. Training and deploying models like Claude or OpenAI’s ChatGPT requires extraordinary computing resources. While tech giants like Google and Meta can offset these costs through their broader business operations, dedicated AI firms like Anthropic rely heavily on external funding to compete.

For instance, rival, OpenAI, also with a standalone model, recently raised $6.6 billion to bankroll the high cost of computing of its model. This drove its valuation to $157 billion.

For Amazon, this partnership is a critical move to stay competitive, with hopes that Claude and a revamped Alexa can keep pace with rivals. Whether this gamble will help it catch up to rivals like Microsoft and OpenAI remains to be seen.