Throughout the artificial intelligence (AI) revolution, one start-up has dominated the headlines: OpenAI, the maker of ChatGPT.
While OpenAI remains one of the most formidable names in the AI realm, a competing large language model (LLM) developer called Anthropic should not be overlooked. Two weeks ago, Anthropic signed a multibillion-dollar deal with Microsoft (MSFT +0.49%) and Nvidia (NVDA +2.02%).
Let's break down the details of Anthropic's partnership with big tech and assess why this is a meaningful development for Nvidia investors.
NASDAQ: NVDA
Key Data Points
How does Anthropic's deal with Nvidia work?
Anthropic's Claude LLM competes heavily with models like ChatGPT, Gemini, and Perplexity. Throughout the AI revolution, Anthropic has worked closely with Amazon, which has invested $8 billion into the start-up.
Over the last several months, OpenAI has been inking new cloud and chip partnerships -- broadening its exposure to a host of different vendors. Now, Anthropic appears to be doing the same.
Anthropic has agreed to purchase $30 billion of computing capacity from Microsoft's cloud infrastructure service, Azure. In addition, it has also committed to contract up to 1 gigawatt of additional capacity from Microsoft.
Azure's AI processing power is largely provided by Nvidia GPUs. As part of Anthropic's deal with Microsoft, Nvidia will be supplying clusters of its current Grace Blackwell superchips, as well as chips built on its upcoming Vera Rubin architecture.
Nvidia will invest up to $10 billion in Anthropic, and Microsoft has committed up to an additional $5 billion to help finance the deal.
Image source: Nvidia.
Why is Anthropic important for Nvidia?
On the surface, this partnership with Anthropic might not seem like such a huge deal. However, I see a couple of benefits that investors may not be fully accounting for.
First, Nvidia's customer base is highly concentrated among the hyperscalers -- Microsoft, Amazon, Alphabet, Meta Platforms, and Oracle. By adding Anthropic as a customer, Nvidia is reducing its reliance on that small cohort of tech giants.
More importantly, though, is what the deal with Anthropic represents underneath the surface. News of this partnership came shortly after Nvidia committed up to $100 billion to OpenAI's 10-gigawatt data center project.
Perhaps the most lucrative detail is that Anthropic will be using Nvidia's current GPUs, as well as its upcoming Rubin chips. This type of deal structure provides Nvidia with a high degree of revenue visibility and customer lock-in relative to rivals such as Advanced Micro Devices.
With Anthropic now a customer, Nvidia is no longer purely supplying the hardware on which AI models are built. Rather, it is evolving into more of a full-spectrum platform for AI ecosystems -- designing the next-generation chips and supplying the accompanying software upon which models will be trained and inferenced for the long term.
Image source: Getty Images.
How meaningful is the Anthropic deal for Nvidia?
At this time, it's hard to know for sure how much incremental revenue and profit Anthropic could provide to Nvidia. However, I'd encourage investors to think less about counting pennies, lest they overlook the real dollars at stake here.
Over the last three years, Nvidia's valuation has soared in lockstep with the rising capital expenditures of big tech. Research from Goldman Sachs estimates that nearly $500 billion will be spent on AI infrastructure in 2026 by the hyperscalers alone.
Investors could view rising AI infrastructure spending as a proxy for demand for Nvidia's data center products. Now, with Anthropic (and OpenAI) beginning to lay the foundation for its own large-scale AI roadmap, Nvidia has a unique opportunity to expand its addressable market beyond the big tech titans.
Given that the accelerating investments in AI infrastructure have already contributed multiple trillions to Nvidia's market capitalization, I think the deal with Anthropic could result in a meaningful step toward the chip designer's next trillion-dollar milestone.
