Amazon said Monday it will invest up to $4 billion in artificial intelligence startup Anthropic, marking the latest big investment in AI as tech giants rush to stake a claim in the rapidly growing market. The move pushed Amazon stock up in trading on Monday.
Through the deal, Anthropic will use Amazon Web Services as its primary cloud-provider and Amazon's custom chips for its AI software. Meanwhile, Amazon will incorporate Anthropic's models and software across its business.
Amazon is committed to an initial $1.25 billion in the deal, which could grow to $4 billion depending on certain conditions, according to the Wall Street Journal. Also, Amazon will hold a minority stake in the startup through the deal.
Further, Amazon said the agreement will help advance generative artificial intelligence, the term for technology that can create content such as text and images from simple descriptive phrases.
"We have tremendous respect for Anthropic's team and foundation models, and believe we can help improve many customer experiences, short and long term, through our deeper collaboration," Amazon Chief Executive Andy Jassy said in a news release.
On the stock market today, Amazon stock ended the session 1.7% higher to 131.27.
Amazon Stock: AI Arms Race
The deal marks the latest AI investment from a tech giant this year. Further, firms have been racing to adopt generative AI into their business following the breakout success of OpenAI's ChatGPT.
In January, Microsoft invested $10 billion in OpenAI and announced a partnership with the private startup.
San Francisco-based Anthropic was founded in 2021 by former OpenAI employees. The company's Claude AI assistant offers humanlike responses to prompts, similar to ChatGPT.
Amazon is chasing Microsoft in the race to develop AI products. For instance, the company launched its Amazon Bedrock offering in April. The service allows users of Amazon's cloud-computing to build generative AI applications.
The deal signals a "newfound urgency" in Amazon's strategy to further integrate generative AI into Amazon Web Services, according to Wedbush analyst Scott Devitt.
"The agreement has the potential to accelerate adoption and deployment of additional generative AI capabilities to AWS customers and should ease investor concerns that Amazon has been less proactive than its peers in its approach to generative AI, in our view," Devitt wrote in a client note Monday.
Beyond that, Amazon said last week it will lean on generative AI to make its Alexa smart-home devices more interactive.
After a down year in 2022, Amazon stock is up about 54% this year.
