Humanitarian deal could help 'perception gap' between AI and AI Microsoft

Amazon (Amzn) strengthened its position in generative artificial intelligence when it completed a $4 billion investment in startup Anthropic, according to an Amazon stock analyst.

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The Seattle-based tech giant said Wednesday it has invested an additional $2.75 billion in Anthropic, complementing a $4 billion deal agreed to by Amazon in September. San Francisco-based Anthropic is the developer of Claude, an AI-powered chatbot. Amazon previously invested $1.25 billion in September

After the announcement, BofA Securities analyst Justin Post said the deal could help push Amazon into artificial intelligence. It competes with the company's lucrative Amazon Web Services business Microsoft's (MSFT) Azure to give organizations access to the massive amounts of cloud computing power needed for AI applications. Microsoft has been aided in this endeavor through its alliance with OpenAI, whose ChatGPT chatbot helped launch the AI ​​craze in 2022.

“while Investors has offered Amazon as well Behind Azure in GenAI capabilities in the cloudThis perception gap can be approached as anthropological Capabilities converge with ChatGPT and AWS are starting to benefit more from AI-driven demand Growth,” Post wrote to customers late Wednesday.

The Post reiterated a Buy rating on Amazon stock and a price target of 204. In today's stock market, Amazon stock closed slightly higher at 180.38.

The Anthropic “Big Step Forward.”

San Francisco-based Anthropic was founded in 2021 by former OpenAI employees. The company's Claude AI assistant provides human responses to prompts, similar to ChatGPT.

While OpenAI is seen as a leader in generative AI capabilities, Post noted that Anthropic recently took a “huge step forward.” Claude's model 3, released at the beginning of March, recently surpassed ChatGPT-4 to take first place in “Chatbot arena“, an open source leaderboard of AI models ranked by researchers.

As part of the investment deal, Anthropic is using custom AI computing chips from Amazon. Furthermore, Amazon Web Services is Anthropic's primary cloud provider. Meanwhile, Amazon provides access to Claude through its AWS Bedrock offering. Launched last spring, Bedrock allows companies to use a set of large language models within AWS.

“As Microsoft did with OpenAI, we expect Amazon to do so feature Anthropic's capabilities on AWS that it Cloud clients (And use Proprietary chips to save costs For some applications),” Post wrote.

Amazon Stock: Leading Cloud Market Share

Amazon is the largest provider of cloud infrastructure services by market share, according to several estimates. But Microsoft has gained share in recent quarters. As Post noted, some investors see Microsoft as better positioned for AI because of its partnership with OpenAI.

On Microsoft's earnings call in January, CEO Satya Nadella told analysts that “Azure once again captured share this quarter with our AI advantage.” However, Amazon is making clear to investors that AWS expects to become a leader in AI as well. On its February earnings call, CEO Andy Jassy told analysts that Amazon expects generative AI to generate “tens of billions of dollars” in revenue in the next few years.

Meanwhile, other analysts noted the expanded Amazon-Anthropic deal on Wednesday. CFRA Research Analyst Arun Sundaram reiterated a Buy rating in a client note.

“Claude 3 Opus is the most intelligent chatbot in the model family, and appears to be on par or even better than OpenAI's GPT-4, especially in the areas of reasoning, mathematics, and programming,” Sundaram wrote. “We view today’s investment as AMZN’s latest commitment to being a leading AI company.”

Amazon stock has gained about 20% so far this year. But stocks have ranged between 170 and 180 in recent weeks.

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