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> ” AWS will become Anthropic’s primary cloud provider” How much of this becomes creative accounting? AWS gets to reduce its profits by making this investment

> ” AWS will become Anthropic’s primary cloud provider” How much of this becomes creative accounting? AWS gets to reduce its profits by making this investment, which means they pay less taxes. Then with AWS’ own money, they will get to recognize this as new AWS cloud revenue continuing their sales growth. While all during which they also get an equate stake. This seems like a creative way for AWS (and Microsoft with OpenAI) to artificially boost cloud revenues.

anonylizard 3y ago
There's no creative accounting. Amazon reduces its profits, and pays less taxes, true. They also do get sales growth. But nowhere is this "AWS' own money". AWS has to pay Nvidia for the chips. Nvidia is worth 1 trillion for a reason.
- alberth 3y ago
  > ”But nowhere is this ‘AWS' own money" But it is. Anthropic will be paying for AWS cloud services with the same money AWS gave them as an investment.
  - benterix 3y ago
    I think you're both right. It's a bit inflated as AWS services are overpriced in general. On the other hand, we're speaking specifically about significant use of Nvidia GPUs which are in demand right now so it's not like Amazon can just use their spare capacity.
- inoop 3y ago
  AWS has its own line of AI accelerators called Inferentia that offers reduced cost versus Nvidia, but it's often a pain to make stuff work because everything is written for CUDA. Inferentia team spends a lot of time porting OS models to their hardware for customers to use (e.g. through SageMaker).
alephnerd 3y ago
> How much of this becomes creative accounting? None. While AWS is probably providing sweetheart compute rates to it's portfolio, their stake in the company will also rise in value as the company grows out their revenue and goes for another round, or even an IPO. This is the whole point of CVC - put strategic investments in rising companies playing in segments or sub-segments that you as a company don't want to enter directly yet while building out an ecosystem and also ensuring you don't become the next Kodak.
cowsandmilk 3y ago
> AWS gets to reduce its profits by making this investment, which means they pay less taxes. That’s not how it works. If they buy 4 billion of shares, they then have an asset worth 4 billion. No impact to profit.
dist-epoch 3y ago
> AWS gets to reduce its profits by making this investment, which means they pay less taxes. This has been Amazon strategy for a long long time now, almost two decades. But Bezos views this in a different way, not as an accounting trick to look good to investors, but as a way to kill the competition, since you have lower costs by not paying taxes, so you can redirect a part of what would have been taxes to attract customers (lower prices, excellent customer support, ...)
martinald 3y ago
That's not how it works. The investment is an asset on the balance sheet, it is very unlikely to reduce taxable profits. I don't know the US corporation tax situation much, but if it's anything like the UK then you couldn't use that to offset profits for the year. You could if the investment failed, but then you've lost a lot more money than the tax saving (as you've lost the entire $4bn investment). You might be right that Anthropic could then spend that money back with AWS, but that would again be subject to tax on any profits it generates for AWS. Also, if they spent (say) $2bn of the money with AWS but had nothing to show for it, when Anthropic raises again you'd expect the valuation to decrease substantially. I very much doubt it is a tax saving mechanism, nor do I think it is a particularly good way to juice sales (compared to spending say $4bn on marketing, or discounts, or whatever).

anonylizard 3y ago

There's no creative accounting. Amazon reduces its profits, and pays less taxes, true. They also do get sales growth. But nowhere is this "AWS' own money". AWS has to pay Nvidia for the chips. Nvidia is worth 1 trillion for a reason.

alberth 3y ago
> ”But nowhere is this ‘AWS' own money" But it is. Anthropic will be paying for AWS cloud services with the same money AWS gave them as an investment.
- benterix 3y ago
  I think you're both right. It's a bit inflated as AWS services are overpriced in general. On the other hand, we're speaking specifically about significant use of Nvidia GPUs which are in demand right now so it's not like Amazon can just use their spare capacity.
inoop 3y ago
AWS has its own line of AI accelerators called Inferentia that offers reduced cost versus Nvidia, but it's often a pain to make stuff work because everything is written for CUDA. Inferentia team spends a lot of time porting OS models to their hardware for customers to use (e.g. through SageMaker).

alephnerd 3y ago

> How much of this becomes creative accounting? None. While AWS is probably providing sweetheart compute rates to it's portfolio, their stake in the company will also rise in value as the company grows out their revenue and goes for another round, or even an IPO. This is the whole point of CVC - put strategic investments in rising companies playing in segments or sub-segments that you as a company don't want to enter directly yet while building out an ecosystem and also ensuring you don't become the next Kodak.

cowsandmilk 3y ago

> AWS gets to reduce its profits by making this investment, which means they pay less taxes. That’s not how it works. If they buy 4 billion of shares, they then have an asset worth 4 billion. No impact to profit.

dist-epoch 3y ago

> AWS gets to reduce its profits by making this investment, which means they pay less taxes. This has been Amazon strategy for a long long time now, almost two decades. But Bezos views this in a different way, not as an accounting trick to look good to investors, but as a way to kill the competition, since you have lower costs by not paying taxes, so you can redirect a part of what would have been taxes to attract customers (lower prices, excellent customer support, ...)

martinald 3y ago

That's not how it works. The investment is an asset on the balance sheet, it is very unlikely to reduce taxable profits. I don't know the US corporation tax situation much, but if it's anything like the UK then you couldn't use that to offset profits for the year. You could if the investment failed, but then you've lost a lot more money than the tax saving (as you've lost the entire $4bn investment). You might be right that Anthropic could then spend that money back with AWS, but that would again be subject to tax on any profits it generates for AWS. Also, if they spent (say) $2bn of the money with AWS but had nothing to show for it, when Anthropic raises again you'd expect the valuation to decrease substantially. I very much doubt it is a tax saving mechanism, nor do I think it is a particularly good way to juice sales (compared to spending say $4bn on marketing, or discounts, or whatever).