AI: Google's strategy with Anthropic

...upping the ante on their Google Cloud LLM AI options

The chips keep flowing in the AI Tech Wave gold rush in the early days of building out the infrastructure with billions of premptive capex and partnership investments. It was only last month I’d written in “Amazon bets on an LLM AI” via a multi-billion dollar investment and partnership with LLM AI company Anthropic.

This was AFTER Google with multiple Foundation LLM AI models of its own like Palm 2 and the upcoming multimodal Gemini, had already partnered with Anthropic with billions earlier. The logic of moves were of course as follows, as I’d explained:

“Key to understand here is that it’s an AI Infrastructure chess game in these early days of the AI Tech Wave, with the companies in the first three boxes below trying to make sure the companies in boxes 5 and especially 6, are their customers and partners down the road.”

Well, it may be a poker game as well as a chess game, as Google seems to have upped the ante with Anthropic. As Reuters reports, “Google agrees to invest up to $2 billion in OpenAI rival Anthropic”:

“Google has agreed to invest up to $2 billion in the artificial intelligence company Anthropic, a spokesperson for the startup said on Friday.”

“The company has invested $500 million upfront into the OpenAI rival and agreed to add $1.5 billion more over time, the spokesperson said.”

“Google is already an investor in Anthropic, and the fresh investment would underscore a ramp-up in its efforts to better compete with Microsoft, a major backer of ChatGPT creator OpenAI, as Big Tech companies race to infuse AI into their applications.”

Anthropic as I have discussed before, was founded not too long ago by former founders/employees of OpenAI, and has raised billions from financial and strategic investors to become the leading developer of Foundation LLM AI models after OpenAI. As Reuters goes on to explain:

“Amazon.com also said last month it would invest up to $4 billion in Anthropic to compete with growing cloud rivals on AI.”

“In Amazon's quarterly report to the U.S. Securities and Exchange Commission this week, the online retailer detailed it had invested in a $1.25 billion note from Anthropic that can convert to equity, while its ability to invest up to $2.75 billion in a second note expires in the first quarter of 2024.”

“Anthropic, which was co-founded by former OpenAI executives and siblings Dario and Daniela Amodei, has shown efforts to secure the resources and deep-pocketed backers needed to compete with OpenAI and be leaders in the technology sector.”

The key motivation for Google to understand here is that Anthropic’s LLM AI models are an important EXTERNAL LLM AI model to offer to business customers of its Google Cloud data center business, which ranks no. 3 after Microsoft Azure and no. 1 Amazon AWS.

As I outlined last week, Amazon, Microsoft and Google all reported their quarterly earnings, and public investors are very focused on the relative performance of each of the companies’ cloud business relative to enterprise and business customers ramping up AI infrastructure products and services.

While Google has industry leading Foundation LLM AI products of its own to go head to head with Microsoft and OpenAI’s GPT-4 LLM AI, with Palm 2 and the upcoming Google Gemini, those products are more for Google’s OWN products and services. Not necessarily to be offered to business and enterprise customers to build their own AI products and services.

This of course is in sharp contrast with Microsoft and OpenAI, that are both building their own products and services on GPT-4 and beyond, while also selling access to the same to enterprise customers for presumably billions in incremental revenues via APIs and other services.

So now both Amazon AWS and Google are planning on leveraging Anthropic’s Foundation LLM AI for business customers. While also focusing on other LLM AI models for their own internal products and services. In Amazon’s case, it’s another LLM AI offering for their Alexa Voice assistants business.

The other initiative by both companies is also to have Anthropic support Google and Amazon’s own GPU hardware infrastructure, which would allow them to lower their GPU costs relative to Nvidia, which otherwise is the current gatekeeper to the majroity of GPU AI infrastructure for the industry. Indeed, as I’ve described before, Nvidia is playing its own poker/chess game with Amazon, Microsoft, Google and other cloud data center companies, ramping up its own AI Compute infrastructure with their GPU chips around their DGX AI compute infrastructure.

So the billions in chips going in for these corporate strategic investments in companies like Anthropic are part of a longer term set of strategies to have vertical control of the AI infrastructure tech stack boxes in the chart above, specifically in the boxes leading up the all important Box no. 6 as discussed before. We saw these types of moves in earlier waves and cycles, and we’re seeing them ramp up again.

Google is bolstering its LLM AI options with Anthropic, both for external customers, and Google’s vertical AI tech infrastructure stack. These still are the early moves by all the players, so the game remains fluid. More chip bets are likely to go into the pot before the game is called. Stay tuned.

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)