The two leaders in AI development are OpenAI and Anthropic. OpenAI embodies the Silicon Valley mindset of "move fast, break things, and keep going until you get to your destination". Anthropic embodies a different mindset that can be summed up as "slow and steady wins the race". While OpenAI was first to create an AI chatbot, an AI image creation service, and an AI app store, Anthropic was slow to release their Claude AI chatbot to the public and hasn't dabbled into AI image creation or other AI applications.

The recent unveiling of Claude 3 is proof that slow and steady wins the race. As you can see, all three Claude 3 AI models have capabilities that surpass both OpenAI's GPT-4 and Google's Gemini 1.0 Ultra AI models. Even if Anthropic's emphasis on AI safety slows its development, they've been able to create better AI models than anyone else. Outsiders observing this will say that Anthropic has nailed the sweet spot strategy when it comes to AI development.

Source: Anthropic

$AMZN first invested $1.25 billion in Anthropic in September 2023 as $MSFT, $GOOGL, and OpenAI have already unveiled their chatbots and have seen immense success from launching them. While Amazon wasn't interested in creating a chatbot, it was interested in being the primary cloud services and semiconductors provider to the AI research firm. After the release of Claude 3, Amazon then invested $2.75 billion more in Anthropic. Before Anthropic, Amazon's biggest venture bet was its $1.3 billion investment in $RIVN. Clearly Amazon is more optimistic on Anthropic than on Rivian and for good reason. Unlike the investment in Rivian, Amazon's investment in Anthropic will allow Amazon to build anything they want by leveraging Anthropic's technology.

As for Anthropic, since they already have the sweet spot strategy in AI development, their partnership with Amazon ensures it will have enough computing resources to compete with OpenAI and $GOOGL Gemini. Without Amazon, Anthropic will either have to acquire those computing resources from $MSFT, who has already dedicated a significant portion of their computing resources to OpenAI, or to Google, who already dedicated a significant portion of their computing resources to DeepMind. Amazon was the best choice as they don't have partnerships with any other AI research firms.

Importantly, if the battle is only about computing resources, then Google would beat both OpenAI and Anthropic. However, the battle is bigger as there are other factors to think about, like research efficiency, focus, and execution. And both OpenAI and Anthropic thrive in those areas.

Overall, Amazon is smart to double down on Anthropic. It will be exciting to see what innovations Amazon creates with Anthropic's technology and I am optimistic that Anthropic will be key to Amazon's new era of growth. Imagine the new wave of products and services Amazon will create because it was able to leverage Anthropic's technology. All the ads that they can put on Alexa to monetize the Alexa devices. All the other AI companies that it can attract to AWS. And all the new AWS features it can create and offer to current customers. Amazon is smart to double down on Anthropic.