Amazon invests $2.75 billion in AI startup Anthropic, marking its largest venture investment to date.

• An artificial intelligence startup is receiving billions of dollars in funding from Amazon as the company seeks a competitive advantage in the rapidly developing technology industry.
• Anthropic, a tech and cloud company, announced on Wednesday that it has received an additional $2.75 billion in funding from its parent company, bringing its total investment to $3.0 billion.

"We believe our collaboration with Anthropic will further improve our customers' experiences, and we are excited to see what the future holds for generative AI, which we believe will be the most transformational technology of our time," said Swami Sivasubramanian, vice president of data and AI at AWS.

Generative AI has become a buzzword in business and has experienced rapid growth in the past year, with $29.1 billion invested in over 700 deals, according to PitchBook. OpenAI's ChatGPT demonstrated the technology's ability to generate human-like language and creative content in late 2022. Since then, over 92% of Fortune 500 companies have adopted the platform, with applications in industries such as financial services, legal applications, and education.

Cloud providers like Amazon Web Services don't want to be caught flat-footed.

Anthropic has agreed to use AWS as its primary cloud provider and Amazon chips to train, build, and deploy its foundation models. Amazon is developing its own chips that may eventually compete with those used by Anthropic.

Anthropic has received investment from both Google and Salesforce. Google Cloud has agreed to invest up to $2 billion in Anthropic, with a $500 million cash infusion and another $1.5 billion to be invested over time.

Anthropic's latest model suite, unveiled this month, represents the first time the company has incorporated "multimodality" into its generative AI offerings, enabling users to incorporate photo and video capabilities.

"Daniela Amodei, co-founder of Anthropic, emphasized the importance of acknowledging that no model is perfect in a recent interview with CNBC. She stated that their models are designed to be both capable and safe, but there will still be instances where they make mistakes."

The decline in acquisitions by the top seven tech companies, including Amazon, Microsoft, Nvidia, Alphabet, and , has been compensated for by a rise in venture-style investments, as per Pitchbook.

The amount of AI and machine-learning investments made by the seven tech companies increased to $24.6 billion in 2022, from $4.4 billion in 2022, as per Pitchbook. However, the number of M&A deals made by Big Tech decreased from 40 in 2022 to 13 in the same year.

"Brendan Burke, a Pitchbook AI analyst, stated in an interview that there are two motivations for investing in potential disruptors: paranoia and sales increase. The former involves investing in companies that are likely to use the other company's product, making them partners rather than competitors."

Critics have accused Big Tech of funneling cash back to their cloud businesses through investments in AI startups, resulting in a seemingly circular nature to these agreements. This practice, described by Benchmark's Bill Gurley as a way to "goose your own revenues," has come under fire.

The US Federal Trade Commission is scrutinizing partnerships, including Microsoft's OpenAI deal and Google and Amazon's Anthropic investments. "Round tripping," which can be illegal if used to deceive investors, is a concern. However, Amazon claims that this type of venture investing does not fall under this category.