How Anthropic can Catch OpenAI with Amazon's Support

Friends,

When I saw this news earlier today (September 25th), I almost couldn’t believe it. I had expected Alphabet to be the main entity funding Anthropic, certainly not Amazon! But Amazon has to do something, it’s too behind in Generative A.I.

There are so many incredible startups in Generative A.I., and funding for the favorites continues to accelerate. With ChatGPT showing weakness in demand and value provided, others are ready to take its place.

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The Biggest Generative A.I. Funding Reveal since Microsoft and OpenAI

On September 25th, 2023 Amazon and Anthropic announced a strategic collaboration that will bring together their respective industry-leading technology and expertise in safer generative artificial intelligence (AI) to accelerate the development of Anthropic’s future foundation models and make them widely accessible to AWS customers.

After $13 Billion by Microsoft into OpenAI and major rounds for the likes of Inflection others, some of these deals are getting rather large. We knew Anthropic would take this route to catch up to OpenAI and Amazon does make sense given Amazon’s agnostic approach with AWS and their competition with Azure. Google’s Gemini might have competed too directly with Anthropic.

According to Time’s piece on the founders:

Anthropic, which was founded in 2021, has carried out pioneering “mechanistic interpretability” research that aims to allow developers to carry out something analogous to a brain scan—to see what’s really going on inside an AI system, rather than relying on its text outputs alone.

It’s not exactly $4 Billion though really, Amazon said it will initially invest $1.25 billion for a minority stake in Anthropic, with an option to increase its investment in Anthropic to a total of $4 billion.

The move underscores Amazon’s aggressive AI push as it looks to keep pace with rivals such as Microsoft and Alphabet’s Google, though they seem noticeably behind inspite of supposed upgrades to Alexa (and her terrible voice).

It Boosts the Credibility of Amazon’s AI ECosystem

“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

The $1.5 billion into Anthropic gives Amazon Bedrock more solid foundations.

Anthropic will use AWS Trainium and Inferentia chips to build, train, and deploy its future foundation models, benefitting from the price, performance, scale, and security of AWS. The two companies will also collaborate in the development of future Trainium and Inferentia technology.

Quicktake

The partnership could help Amazon better compete against Google and Microsoft as the AI arms race heats up.

Anthropic’s Claude and Claude 2 large language model–based chatbots are direct competitors of OpenAI’s ChatGPT and GPT-4. Even though Anthorpic is a spin-off of OpenAI they are doing things differently and in some cases, better.

They have less money, but more values. It’s a noticeable difference in philosophy, methodology and might make some customers more comfortable. AI safety, governance, ethics and leadership is everything. Anthropic has a chance of having higher AI alignment.

I have covered this in greater detail several times before in this and related Newsletters.

Anthropic was founded roughly two years ago by former OpenAI research executives and recently debuted its new AI chatbot called Claude 2. Anthropic works closely already with the likes of Zoom and Notion.

But Amazon’s partnership is bigger and more related to the Cloud and could significantly help Anthropic’s enterprise distribution.

Read the Blog

Quote:

“We are excited to use AWS’s Trainium chips to develop future foundation models,” said Dario Amodei, co-founder and CEO of Anthropic. “Since announcing our support of Amazon Bedrock in April, Claude has seen significant organic adoption from AWS customers. By significantly expanding our partnership, we can unlock new possibilities for organizations of all sizes, as they deploy Anthropic’s safe, state-of-the-art AI systems together with AWS’s leading cloud technology.”

What Amazon Gets

As part of the deal, Amazon will gain minority ownership of the company and has agreed to incorporate Anthropic’s technology into various products across its business, including the? Amazon Bedrock service for building AI applications.

What Anthropic Gets

Anthropic will also use Amazon’s custom chips to build, train, and deploy its future AI foundation models, and has committed to using Amazon Web Services (AWS) as its primary cloud provider.

It’s really a win-win for both companies that are strategically interlocking that could significantly improve the entire ecosystem.

Google invested $300 million in Anthropic in late 2022, according to a report from the Financial Times. This means both Amazon and Google likely have significant ownership stakes in Anthropic now. This also suggests Anthopric could get more funding at will from either or both of them.

Of course they need to execute, perform and keep being a trustworthy source for foundational models and Claude needs to continue to evolve well. With this amount of funding and their leadership, I don’t see that being a major problem.

Anthropic is perhaps the most trustworthy foundation LLM on the market today. They seem to genuinely care and see that as a major priority, even putting it at the forefront of their branding.

TechCrunch reported exclusively earlier this year that Anthropic, which also counts Google as an investor, plans to raise as much as $5 billion over the next two years. This fulfills their plan in part, if not in full if Amazon takes the $4 Billion option.

OpenAI is Typically More Expensive and Less Trustworthy

The PR goes on:

An AWS customer since 2021, Anthropic has grown quickly into one of the world’s leading foundation model providers and a leading advocate for the responsible deployment of generative AI. Their foundation model, Claude, excels at a wide range of tasks, from sophisticated dialogue and creative content generation to complex reasoning and detailed instruction, while maintaining a high degree of reliability and predictability. Its industry-leading 100,000 token context window can securely process extensive amounts of information across all industries, from manufacturing and aerospace to agriculture and consumer goods, as well as technical, domain-specific documents for industries such as finance, legal, and healthcare.

Given the declines in traffic to ChatGPT, OpenAI might be feeling more competition from Cohere, AI21 Labs and Anthropic already nearing the end of 2023. I’m not sure who would be comfortable trusting ChatGPT for Enterprise. If Nvidia patriated in funding Databricks, and Databrick have the likes of spinoff AnyScale, what do you suppose is happening to the future of Enterprise LLM markets?

What is Anyscale?

Friends, There are so many LLM based startups, it’s getting hard to keep track. I was watching Thursday Nights in AI via Outset Capital, and I decided they would be fun to cover. Anyscale is a Series C unicorn startup backed by VCs including Andreessen Horowitz…

The Rise of Amazon Bedrock

Open-Source is going to drastically bring down prices cutting into profits of OpenAI and Microsoft, since customers want more control over their proprietary data and to work with companies they can trust. OpenAI has not proven itself to be a credible privacy centric B2B company at this point in 2023.

If Anthropic is the little sister of OpenAI, she thinks about things a bit differently. That they have sided with funds from both Alphabet and Amazon means they are in direct competition with the Microsoft-OpenAI duo where seemed to care about speed to market more than safety with adoption likely waning. That sort of greed has consequences and the market understands how important trustworthiness is in this domain.

Anthropic gets a lot from this deal. In Amazon, Anthropic has found a deeply-pocketed strategic investor that can also provide it with compute power to build future AI models and then find and help sell the offerings to scores of cloud customers.

Going back to the Time profile of the founders, they say:

Anthropic has seven founders, all of whom previously worked at OpenAI before leaving to start their own company. Dario and Daniela are diplomatic about what, if anything, pushed them to leave, but suggest they had a different vision for building safety into their models from the beginning.

Clearly OpenAI’s history has been fraught with power grabs, schisms and betrayals. Poaching AI scientists from other companies is part of their culture. Sam Altman is not the best lobbying factor for Generative A.I. in the world, his exaggeration of AGI and the thread of ASI is not even rational and feels more like weak marketing.

All of which to say Anthropic are definately the good guys in this story. Microsoft’s ambitions have been lofty and fraught with bad strategy in throwing $13 Billion at OpenAI in what amounts to a radical commercialization of a tech that wasn’t even ready for public consumption just so they could get early access to GPT-4.

I go a bit into it in this article:

How Microsoft Upgraded the Internet Before Emergent A.I. Arrived

Hello Everyone, If Google and Facebook kept the internet back in terms of innovation centralizing the web around an Advertising Duopoly so powerful that it held the internet in its powerful grips for more than a decade leading directly to less innovation in Silicon Valley; in a few moves…

I guess those 2023 figures for funds invested into Generative A.I. will need a refresh.

But for the time being it’s important to realize you can only count $1.5 Billion of Amazon with Anthropic. Anthopric is giving up valuable equity to grow faster in the mid 2020s.

Anthopric and Amazon can also improve their marketing narrative of being the safest option. As part of the investment agreement, Anthropic will use Amazon’s cloud giant AWS as a primary cloud provider for mission critical workloads, including safety research and future foundation model development.

1. At the bottom layer, AWS continues to offer compute instances from NVIDIA as well as AWS’s own custom silicon chips, AWS Trainium for AI training and AWS Inferentia for AI inference.
2. At the middle layer, AWS is focused on providing customers with the broadest selection of foundation models from multiple leading providers where customers can then customize those models, keep their own data private and secure, and seamlessly integrate with the rest of their AWS workloads—all of this is offered through AWS’s new service, Amazon Bedrock.

It’s unclear how adoption is going for Amazon Bedrock so far in 2023. I think they needed Anthropic as much as Anthropic needed them. Which means the partnership can blossom further. $4 Billion would go a long ways, but what’s their valuation at then?

Anthropic is Becoming a Viable Alternative to OpenAI in 2024

Anthropic — which also counts Spark Capital, Salesforce, Sound Ventures, Menlo Ventures and Zoom among its backers — has raised a total of $2.7 billion to date. The startup?was valued at about $5 billion in May this year when it secured $450 million in a funding round. It didn’t say how Amazon valued Anthropic in the new investment. My guess is Anthopric is worth between $10 and $12 Billion at the time of Amazon’s significant entry. So Amazon is getting at least another 10% share in the company. Google already has 10%.

Anthropic already counts some high-profile backers, including Google and Salesforce Ventures. Adding Amazon gives them credibility and the ability to scale faster.

You might remember Anthrorpi’s Series C included Google, Salesforce Ventures, Sound Ventures, Zoom Ventures, Menlo Ventures, and others. Anthropic markets itself as an AI safety and research company that builds reliable, interpretable, and steerable AI systems.

However it started, it might end up becoming something fundamentally pretty different. The company says that the feedback from its early customers has been overwhelmingly positive, and that Claude is much less likely to produce harmful outputs, easier to converse with, and more steerable than other AI assistants.

See?Open Roles at Anthropic.

Anthropic casts itself as an AI safety-research lab. To do that research, however, the Amodei siblings have calculated they need to build their own state-of-the-art AI models. For that, they need vast amounts of computing power, which in turn means they need a lot of money. With Amazon, they basically doubled their funding in just one investment. They had previously raised $1.6 Billion before this deal with Amazon.

Amazon has initially committed to a $1.25 billion investment, with an option to grow the investment by a further $2.75 billion. If it does reach that $4 billion total, Bloomberg (BNN is free) reports that the deal will represent the largest known investment ever related to AWS, which is currently the world’s largest seller of on-demand computing power and data storage.

So this represents a huge moment for Anthopric and as such Generative A.I. in 2023.