E-commerce giant Amazon (NASDAQ:AMZN) announced its decision to invest up to $4 billion in OpenAI-rival artificial intelligence (AI) firm Anthropic and take a minority stake in the start-up. The move will help Amazon boost its aggressive push into the lucrative AI market and keep pace with tech giants like Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL, GOOG).
In particular, Microsoft has invested billions of dollars in ChatGPT developer OpenAI to capture generative AI opportunities.
Details of Amazon, Anthropic Collaboration
Under a strategic collaboration, Amazon Web Services (AWS) will become the primary cloud provider for Anthropic. The AI startup intends to run most of its workloads, including the development of future foundation models, on AWS.
Further, Anthropic will provide AWS customers access to future generations of its foundation models through Amazon Bedrock, a fully managed service that makes foundation models from Amazon and other AI companies available through an application programming interface (API). Also, AWS customers will benefit from early access to Anthropic’s unique features and technology.
Another interesting aspect of this deal is that Anthropic has committed to using Amazon’s in-house Trainium and Inferentia chips to develop, train, and deploy its future foundation models. The two companies also plan to collaborate in building future Trainium and Inferentia technology.
Thus, this deal might spark a rise in demand for Amazon’s in-house AI chips. Currently, Nvidia’s (NASDAQ:NVDA) advanced graphics processing units (GPUs) lead the AI chips market and are enjoying massive demand from customers building generative AI applications.
Anthropic was founded about two years ago by former OpenAI research executives. In July, the company launched its new AI chatbot called Claude 2, which generates written text and summarizes documents, among other things. Anthropic claims that its AI technology is safer than that of rivals.
According to some reports, Amazon will initially invest $1.25 billion in Anthropic. It is worth noting that previously Alphabet and Salesforce (NYSE:CRM) also invested in Anthropic.
Is Amazon a Buy or Sell Stock?
Wall Street is highly bullish on AMZN stock, thanks to its dominant position in the e-commerce market, AWS’ cloud computing leadership, and AI prospects.
Amazon’s Strong Buy consensus rating is based on 39 Buys and one Hold. The average price target of $176.18 implies over 36% upside potential. Shares have risen about 54% year-to-date.
Investors should note that Loop Capital analyst Rob Sanderson is the most accurate analyst for AMZN stock, according to TipRanks. Copying the analyst’s trades on AMZN and holding each position for one year could result in 93% of your transactions generating a profit, with an average return of about 29.2% per trade.
