March 4, 2024
AI's proxy war heats up as Google reportedly backs Anthropic with $2B


With a massive $2 billion reported investment from Google, Anthropic joins OpenAI in reaping the benefits of leadership in the artificial intelligence space, receiving immense sums from the tech giants that couldn’t move fast enough themselves. A byword for the age: Those who can, build; those who can’t, invest.

The funding deal, according to sources familiar cited by The Wall Street Journal, reportedly involves $500 million now and up to $1.5 billion later, though subject to what, if any, timing or conditions is unclear. I’ve asked Anthropic for comment on the matter.

It recalls — though it does not quite match — Microsoft’s enormous investment in OpenAI early this year. But with Amazon committing to as much as $4 billion to Anthropic, the funding gap is probably more theoretical than practical.

The Google investment is just the latest in a developing proxy war between rival companies with a limited number of champions to back. Though all these companies are powerful and expert in many areas of technology, the simple fact is none of them would be able to stand up a credible competitor to either OpenAI or Anthropic in the area of large language models. And since everyone is also betting that LLMs are going to upend their business models and become crucial components of any future tech platform, they can’t afford to not have at least partial ownership of the leaders in the space.

They have more than money, as well: It would be similarly difficult for the AI startups (though one may well question that title now) to stand up the infrastructure needed to build and deploy these AI models at the scales required to operate profitably. So the deals also involve things like compute credits and mutual aid.

But it would be silly for them to all invest in the same one and all become its customers as well. Fortunately there are a few outfits worth investing in, with OpenAI and Anthropic the obvious contenders.

When I spoke with Anthropic CEO and co-founder Dario Amodei at Disrupt last month, he hinted (though it is only clear now in retrospect) at this coming cash infusion.

“We’ve only been around for a little over two and a half years… in that time, we’ve managed to raise $1.5 billion, which is a lot. Our team is much smaller, and yet we’ve managed to hold our own,” he said. “We have really, very radically been able to do more with less. And I think relatively soon, we’re going to be in a position to do more with more.”

It all fits into the plan outlined in internal documents obtained by TechCrunch in April: raise $5 billion (or more) to take on OpenAI directly.

Anthropic has learned from watching the other AI companies that it would do well to specialize somewhat as an enterprise product — less shiny and interesting to the average consumer, but potentially more attractive as a long-term business model. “Our sweet spot so far has often been kind of knowledge work and professional services,” Amodei said.

He also emphasized that safety and transparency are high on their list — not something a college student cares about when asking an LLM to rewrite a Wikipedia entry, but massively important for corporate customers who need to know what they’re buying and how it’s performing, and document that for shareholders and regulators.

And what are the billions doing, exactly? Well, by all reports these models are astonishingly expensive to train, deploy and run, and as soon as a company manages to compress one down to the point where it can be used for less than a dime a query, the game changes and a new, more powerful model makes the cheap one look old hat. OpenAI is certainly throwing money away letting people use its product for free, and although Anthropic has the sense to not do that at the same scale, there is no doubt a huge mismatch between cost and income right now.

Anthropic’s internal documents suggested that they would need to spend a billion by the end of 2024 to build their next-generation model, “Claude-Next.”

The more you spend, the better your position — and the position of your moneyed friends. Until Google, Microsoft and Amazon (among others) can stand on their own in this field — and it’s possible they never will — they must wage a proxy war against the others by investing billions to subsidize innovation where it occurs naturally.



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