There's little question that 2023 will likely go down in history as the year artificial intelligence (AI) came of age. While the technology has been around for decades, recent developments in the field have ignited an AI arms race, with each of the biggest tech companies scrambling to get a piece of the action.
Microsoft (MSFT 0.19%) was among the first to recognize the vast potential of generative AI, quickly teaming up with ChatGPT creator OpenAI. What followed was a mad dash by other tech titans to adopt these next-generation algorithms, which can create original content and automate repetitive tasks, kick-starting a host of productivity gains.
While much of the conversation revolved around the looming competition between Microsoft and Alphabet (GOOGL 0.77%) (GOOG 0.74%) with its Bard chatbot, one name was curiously absent from the discussions: Amazon (AMZN 1.92%). Now, the e-commerce leader has put its rivals on notice that it doesn't plan to be left behind in the AI revolution.
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Amazon's sizable investment
In a press release on Monday, Amazon announced a strategic partnership and significant investment in OpenAI-rival Anthropic. As part of the deal, the AI start-up selected Amazon Web Services (AWS) as the company's primary cloud provider and will use Amazon's Trainium and Inferentia chips to train future versions of its Claude generative AI models.
For its part, Amazon will initially invest $1.25 billion and take a minority stake in Anthropic, with the option to increase its investment to $4 billion. Additionally, Anthropic's AI will be deeply integrated into Amazon Bedrock, which provides foundational AI models to AWS cloud computing customers. Plus, AWS users will receive "early access to unique features" that will allow them to customize and fine-tune AI models for their businesses.
A page from Microsoft's playbook
If this announcement seems remarkably similar to one by Microsoft several months ago, it is. After initially investing $1 billion in OpenAI in 2019, its total investment in the start-up climbed to $13 billion by early this year. At the time, OpenAI had a valuation of roughly $29 billion, implying an ownership stake of about 45%.
Microsoft Azure is OpenAI's exclusive cloud provider, while Microsoft integrated ChatGPT into its Bing search engine while providing generative AI capabilities across a wide and growing cross-section of its software-as-a-service (SaaS) offerings.
Most recently, the company announced Microsoft 365 Copilot, a tool designed to "unlock productivity." The AI toolkit helps with a variety of tasks, including prioritizing emails, drafting responses, summarizing key discussion points from Teams meetings, and creating presentations from data. The company said it will charge $30 per user per month for most Microsoft 365 plans. Bing Chat Enterprise, its AI-powered search tool, will be $5 per user per month. Several Wall Street analysts have put pen to paper and estimate that these AI tools could generate incremental revenue of as much as $100 billion annually by 2027.
Alphabet recently announced that its Bard chatbot would be getting an upgrade and would be integrated into existing Google apps, including Gmail, Docs, Drive, Google Maps, YouTube, and Google Flights and Hotels.
Putting its rivals on notice
As recently as May, at the time of its latest funding round, Anthropic was valued at $5 billion. No word as to how much Amazon estimates the company is worth now, but the potential $4 billion investment speaks volumes, though Amazon said this would give it a "minority stake" in Anthropic.
What's more, Anthropic is making a "long-term" commitment to bring future generations of its AI model to AWS cloud customers via Amazon Bedrock.
This puts the tech world on notice that Amazon has no intention of being left behind and is diving headlong into the AI revolution.
