Google’s $2B Investment in Anthropic Intensifies AI Proxy Battle

Home AI in Business Google’s $2B Investment in Anthropic Intensifies AI Proxy Battle
Google's $2B Investment in Anthropic

With a substantial $2 billion investment reportedly coming from Google, Anthropic has joined OpenAI in reaping the rewards of their leadership in the field of artificial intelligence. They are receiving significant sums from tech giants who were not able to keep up with the pace of progress.


According to sources cited by The Wall Street Journal, the funding arrangement comprises an immediate injection of $500 million and a potential additional $1.5 billion in the future. The specific timing and conditions of this additional investment remain unclear.


This development may bring to mind, though not quite parallel, Microsoft’s substantial investment in OpenAI earlier this year. With Amazon pledging as much as $4 billion to Anthropic, any concerns about a funding shortfall appear more theoretical than practical.


The Google investment represents the latest move in an ongoing proxy conflict between rival companies, each with a limited number of champions to support. Although these companies possess extensive expertise in various technological domains, the simple truth is that none of them can establish a credible competitor to either OpenAI or Anthropic in the realm of large language models. Given that all these firms anticipate that large language models will disrupt their business models and become integral components of future tech platforms, they cannot afford to lack partial ownership of the leaders in this field.


Their investments go beyond mere financial contributions; they also encompass non-monetary assets like computing resources and mutual assistance. It would be impractical for all these companies to invest in a single entity and become its customers as well. There are a few worthy contenders, with OpenAI and Anthropic being the most obvious choices.


During a conversation with Dario Amodei, CEO and co-founder of Anthropic, at the Disrupt event last month, he hinted at the impending influx of funds. He stated, “We’ve only been in operation for a little over two and a half years… In that time, we’ve managed to secure $1.5 billion, which is a substantial amount. Despite having a much smaller team, we have held our own. We have achieved significant results with limited resources. I believe that in the near future, we’ll be in a position to achieve even more with additional resources.”


This aligns with the strategy outlined in internal documents obtained by TechCrunch in April, aiming to raise $5 billion or more to directly compete with OpenAI.


Anthropic has learned from observing other AI companies that it would be advantageous to focus on enterprise products, which may not have the same allure for the average consumer but can present a more attractive long-term business model. Amodei emphasized the importance of safety and transparency, critical factors for corporate customers who need to understand the products they are investing in and how they perform, which is crucial for shareholders and regulators.


According to reports, training, deploying, and running these models is extraordinarily expensive. Once a company manages to make these models cost-effective, the landscape shifts as newer, more powerful models emerge. OpenAI may be losing money by offering its product for free, and although Anthropic is more conservative in this regard, there is still a substantial gap between costs and revenue.


Internal documents from Anthropic indicate that they anticipate spending one billion dollars by the end of 2024 to develop their next-generation model, “Claude-Next.”


The more they invest, the stronger their position, as well as the position of their financially backed allies. Until companies like Google, Microsoft, and Amazon can independently compete in this field, they will continue to wage a proxy war by investing billions to foster natural innovation.