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Anthropic is getting $4B in investment in a year where their revenue was about $850M. Even if Amazon had bought them outright for that much, they would not be a

Anthropic is getting $4B in investment in a year where their revenue was about $850M. Even if Amazon had bought them outright for that much, they would not be ahead. The fact that everybody keeps repeating the claim that Amazon is "making money" makes this appear like some kind of scam.

surgical_fire 2y ago
It appears to be a scam because it sort of is. AI needs to be propped up because the bug tech cloud providers they depend on need AI to be a thing to justify their valuations. Tech is going through a bit of a slump where all things being hyped a few years ago sort of died down (crypto? VR? Voice assistants? Metaverse?). Nobody gets very hyped about any of those nowadays. I am probably forgetting a couple of hyped things that fizzled out over the years. Case in point, as much as I despise Apple, they are not all-in the AI bandwagon because it does nothing for them.
- vineyardmike 2y ago
  Go look at earnings reports for big tech companies. AI is definitely driving incremental revenue. Apple is definitely on the AI bandwagon, they just have a different business model and they’re very disciplined. Apple tends not to increase research and investment costs faster than revenue growth. You’ll also notice rumors that they’re lowering their self driving car and VR research goals.
  - surgical_fire 2y ago
    > Go look at earnings reports for big tech companies. AI is definitely driving incremental revenue. Yes. Which proves my point.
    - vineyardmike 2y ago
      Google Cloud revenue up 35% thanks to AI products [1,4,5]. Azure sales by a similar amount (but only 12% was AI products [2]. AWS is up too [3]. In so glad your point was that it’s not a scam, and there are billions of dollars in real sales occurring at a variety of companies. It’s amazing what publicly traded companies disclose if we only bother to read it. I’m glad we’re all not in the contrarian bubble where we have to hate anything with hype. 1. https://technologymagazine.com/articles/how-ai-surged-google-clouds-revenue-growth https://technologymagazine.com/articles/how-ai-surged-google... 2. https://siliconangle.com/2024/10/30/microsofts-ai-bet-pays-off-azure-revenue-grows-stock-falls-infrastructure-supplier-delays/ https://siliconangle.com/2024/10/30/microsofts-ai-bet-pays-o... 3. https://www.ciodive.com/news/AWS-cloud-revenue-growth-AI-demand-earnings/731781/ https://www.ciodive.com/news/AWS-cloud-revenue-growth-AI-dem... 4. https://www.reuters.com/technology/google-parent-alphabet-beats-quarterly-revenue-estimates-2024-10-29/ https://www.reuters.com/technology/google-parent-alphabet-be... 5. https://fortune.com/2024/10/29/google-q3-earnings-alphabet-sundar-pichai-revenue-profit-youtube/ https://fortune.com/2024/10/29/google-q3-earnings-alphabet-s...
      - surgical_fire 2y ago
        > In so glad your point was that it’s not a scam Except it sort of is. It needs AI to be hyped and propped up, so that all those silly companies spending in GCP can continue to do so for a wee bit longer.
        dartos 2y ago
        I don’t know if that makes it a scam. I think you’re putting the cart before the horse. Big cloud providers will push anything that would make them money. That’s just what marketing is. AI was exciting long before big cloud providers even existed. Once it was clear that a product could be made, they started marketing it and selling the compute needed. What’s the scam?
        surgical_fire 2y ago
        Crypto was exciting too. And metaverse. And VR. And voice assistants. Et cetera and so forth. All those things would change the world, and nothing would ever be the same, and would disrupt everything. Except they wouldn't and they didn't. The scam is that those companies don't want to be seen as mature companies, they need to justify valuations of growth companies, forever. So something must always go into the hype pyre. By all means, I hope the scam goes on for longer, as it indirectly benefits me too. But I don't have it in my heart to be a hypocrite. I will call a pig a pig.
        dartos 2y ago
        I think AI isn’t the same as crypto or metaverse. The LLMs and image generation models have obvious utility. They’re not AGI or anything wild like that, but they are legitimately useful, unlike crypto. VR didn’t fail, it just wasn’t viral. Current VR platforms are still young. The internet commercially failed in 2001, but look at it now. Crypto the industry, imo, is a big pyramid scheme. The technology has some interesting properties, but the industry is scammy for sure. Metaverse wasn’t even an industry, it was a buzzword for MMOs during a time when everyone was locked at home. Not really interesting. I don’t think it’s wise to lump every market boom together. Not everything is a scam.
- herval 2y ago
  > Case in point, as much as I despise Apple, they are not all-in the AI bandwagon because it does nothing for them. not sure if you've been paying attention, but AI is literally _the only thing_ Apple talks about these days. They literally released _an entire generation of devices_ where the only new thing is "Apple Intelligence"
  - staticman2 2y ago
    Is Apple investing in AI as much as Google, Meta, Microsoft, and xAI? If not they are not "all in".
    - herval 2y ago
      They don’t disclose it, but I’d imagine so. They also admit to being a couple of years late, so they’re accelerating (as per their last earnings call)
    - adgjlsfhk1 2y ago
      they are investing differently. Apple has a much more captive audience than the others, and as such is focused on AI services that can be run on device. as such, they aren't doing the blessing edge foundation modern research, but instead putting a ton of money into productionizing smaller models that can be run without giant cloud compute.
- herval 2y ago
  Trivia: not sure if you’re aware, but there’s billion dollar companies in all these spaces you claim “nobody cares about”. Every single stock broker in the US trades crypto now. Omniverse earns Nvidia a ton of money, Apple earned a billion dollars with a clunky v1 and Meta is selling more and more Quests every half.
  - surgical_fire 2y ago
    Yeah. Was not really a world changer as it was claimed to be during hype cycle. Billion dollar valuation for a conpany in a given space is not as impressive as you think it is. Do I need to mention some high profile companies with stellar valuations that are sort of a joke now? We can work together on this ;)
  - asadotzler 2y ago
    Apple has spent over $10B on AVP and made back less than 10% of that with no signs of improvement in the next year or two and continued big spending on dev and content. Meta has spent over $50B on Quest and the Metaverse with fewer than 10M MAU to show for it. If you think those are successes, I'll go out and get several bridges to sell you. Meet me here tomorrow with cash.
vineyardmike 2y ago
These sort of investments usually also contain licensing deals. Amazon probably gets Anthropic models they can resell “for free”. The 850M revenue is Anthropic’s, but there is incremental additional revenue to AWS’s hosted model services. AWS was already doing lots of things with Anthropic models, and this may alter the terms more in amazons favor. Are they actually making money? I don’t know, investments aren’t usually profitable on day one. Is this an opportunity for more AWS revenue in the future? Probably.
- celestialcheese 2y ago
  And access to use anthropics models internally, where you have some guarantees and oversight that your corp and customer data aren't leaking where you don't want it to.
mbesto 2y ago
This is not how it works. First, revenue is irrelevant. Second, the investment isn't a loan that they need to repay. They are getting equity. Third, Anthropic is exclusively using AWS to train its models. Which, yes, means if AWS gives them $4B and it costs them $500M/year to pay for AWS services then after 8 years, the cash is a wash. However this ignores the second point. Fourth, there is brand association for someone who wanted to run their own single tenant instance of Claude whereby you would say "well they train Claude on AWS, so that must be the best place to run it for our <insert Enterprise org>" similar to OpenAI on Azure. Fifth, raising money is a signaling exercise to larger markets who want to know "will this company exist in 5 years?" Sixth, AWS doesn't have its own LLM (relative to Meta, MS, etc.). The market will associate Claude with Amazon now.
- warkdarrior 2y ago
  > Sixth, AWS doesn't have its own LLM (relative to Meta, MS, etc.). The market will associate Claude with Amazon now. Amazon/AWS has their line of Titan LLMs: https://aws.amazon.com/bedrock/titan/ https://aws.amazon.com/bedrock/titan/
  - mbesto 2y ago
    Fair. I wasn't aware of that, for the same reason that if you search Titan vs Claude on HN, you'll find way more mentions of Claude: https://hn.algolia.com/?dateRange=all&page=0&prefix=true&query=titan%20LLM&sort=byPopularity&type=story https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que... https://hn.algolia.com/?dateRange=all&page=0&prefix=true&query=claude&sort=byPopularity&type=story https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que... I think its fair to say this is also a hedging strategy then.
- whatshisface 2y ago
  The difference between things you'd say like "it's true that..." and "the market will associate..." basically is the definition of a scam.
  - mbesto 2y ago
deleted 2y ago
[deleted]
throwup238 2y ago
Last I checked, AWS reserve pricing for one year of an 8x H100 pod costs more than just buying the pod yourself (with tens of thousands left over per server for the NVIDIA enterprise license and to hire people to manage them). On demand pricing is even worse. This is essentially money that they would have spent to build out their cloud anyway, except now they also get equity in Anthropic. Whether or not Anthropic survives, AWS gets to keep all of those expensive GPUs and sell them to other customers so their medium/long term opportunity cost is small. Even if the deal includes cheaper rates the hardware still amortizes over 2-3 years, and cloud providers are running plenty of 5+ year old GPUs so there's lots of money to be made in the long tail (as long as ML demand keeps up). They're not making money yet because there's the $4 billion opportunity cost, but even if their equity in Anthropic drops to zero, they're probably still going to make a profit on the deal. If the equity is worth something, they'll make significantly more money than they could have renting servers. Throw financial engineering on top of that, and they may come out far ahead regardless of what happens to Anthropic: Schedule K capital equipment amortizations are treated differently from investments and AFAICT they can double dip since Anthropic is going to spend most of it on cloud (IANAL). That's likely why this seems to be cash investment instead of in-kind credits. I think that’s what people mean when they say Amazon is making money off the deal. It’s not an all or nothing VC investment that requires a 2-3x exit to be profitable because the money just goes back to AWS’s balance sheet.
- AgentOrange1234 2y ago
  Yes and it’s also interesting that they mention using Trainium to do the training. I don’t know how much spend that is, but it seems really interesting. Like, if you’re AWS, and you imagine competing in the long run with NVIDIA for AI chips, you need to fund all that silicon development.
  - axpy906 2y ago
    They mentioned that in the last investment too. That seems like marketing to me as no one is doing bleeding edge research outside of the NVIDIA CUDA run ecosystem.
phillipcarter 2y ago
This is a way to keep the money printer called AWS Bedrock going and going and going. Don't underestimate the behemoth enterprises in the AWS rolodex who are all but assured to use that service for the next 5+ years at high volume.
wepple 2y ago
Wow, I had no idea Anthropic was doing $850m revenue. I know they have high costs, but as a startup that’s some phenomenal income and validation that they’re not pure speculation like most startups are Edit: founded in 2021 and with 1000 employees. That’s just wild growth.

surgical_fire 2y ago

It appears to be a scam because it sort of is. AI needs to be propped up because the bug tech cloud providers they depend on need AI to be a thing to justify their valuations. Tech is going through a bit of a slump where all things being hyped a few years ago sort of died down (crypto? VR? Voice assistants? Metaverse?). Nobody gets very hyped about any of those nowadays. I am probably forgetting a couple of hyped things that fizzled out over the years. Case in point, as much as I despise Apple, they are not all-in the AI bandwagon because it does nothing for them.

vineyardmike 2y ago
Go look at earnings reports for big tech companies. AI is definitely driving incremental revenue. Apple is definitely on the AI bandwagon, they just have a different business model and they’re very disciplined. Apple tends not to increase research and investment costs faster than revenue growth. You’ll also notice rumors that they’re lowering their self driving car and VR research goals.
- surgical_fire 2y ago
  > Go look at earnings reports for big tech companies. AI is definitely driving incremental revenue. Yes. Which proves my point.
  - vineyardmike 2y ago
    Google Cloud revenue up 35% thanks to AI products [1,4,5]. Azure sales by a similar amount (but only 12% was AI products [2]. AWS is up too [3]. In so glad your point was that it’s not a scam, and there are billions of dollars in real sales occurring at a variety of companies. It’s amazing what publicly traded companies disclose if we only bother to read it. I’m glad we’re all not in the contrarian bubble where we have to hate anything with hype. 1. https://technologymagazine.com/articles/how-ai-surged-google-clouds-revenue-growth https://technologymagazine.com/articles/how-ai-surged-google... 2. https://siliconangle.com/2024/10/30/microsofts-ai-bet-pays-off-azure-revenue-grows-stock-falls-infrastructure-supplier-delays/ https://siliconangle.com/2024/10/30/microsofts-ai-bet-pays-o... 3. https://www.ciodive.com/news/AWS-cloud-revenue-growth-AI-demand-earnings/731781/ https://www.ciodive.com/news/AWS-cloud-revenue-growth-AI-dem... 4. https://www.reuters.com/technology/google-parent-alphabet-beats-quarterly-revenue-estimates-2024-10-29/ https://www.reuters.com/technology/google-parent-alphabet-be... 5. https://fortune.com/2024/10/29/google-q3-earnings-alphabet-sundar-pichai-revenue-profit-youtube/ https://fortune.com/2024/10/29/google-q3-earnings-alphabet-s...
    - surgical_fire 2y ago
      > In so glad your point was that it’s not a scam Except it sort of is. It needs AI to be hyped and propped up, so that all those silly companies spending in GCP can continue to do so for a wee bit longer.
      - dartos 2y ago
        I don’t know if that makes it a scam. I think you’re putting the cart before the horse. Big cloud providers will push anything that would make them money. That’s just what marketing is. AI was exciting long before big cloud providers even existed. Once it was clear that a product could be made, they started marketing it and selling the compute needed. What’s the scam?
        surgical_fire 2y ago
        Crypto was exciting too. And metaverse. And VR. And voice assistants. Et cetera and so forth. All those things would change the world, and nothing would ever be the same, and would disrupt everything. Except they wouldn't and they didn't. The scam is that those companies don't want to be seen as mature companies, they need to justify valuations of growth companies, forever. So something must always go into the hype pyre. By all means, I hope the scam goes on for longer, as it indirectly benefits me too. But I don't have it in my heart to be a hypocrite. I will call a pig a pig.
        dartos 2y ago
        I think AI isn’t the same as crypto or metaverse. The LLMs and image generation models have obvious utility. They’re not AGI or anything wild like that, but they are legitimately useful, unlike crypto. VR didn’t fail, it just wasn’t viral. Current VR platforms are still young. The internet commercially failed in 2001, but look at it now. Crypto the industry, imo, is a big pyramid scheme. The technology has some interesting properties, but the industry is scammy for sure. Metaverse wasn’t even an industry, it was a buzzword for MMOs during a time when everyone was locked at home. Not really interesting. I don’t think it’s wise to lump every market boom together. Not everything is a scam.
herval 2y ago
> Case in point, as much as I despise Apple, they are not all-in the AI bandwagon because it does nothing for them. not sure if you've been paying attention, but AI is literally _the only thing_ Apple talks about these days. They literally released _an entire generation of devices_ where the only new thing is "Apple Intelligence"
- staticman2 2y ago
  Is Apple investing in AI as much as Google, Meta, Microsoft, and xAI? If not they are not "all in".
  - herval 2y ago
    They don’t disclose it, but I’d imagine so. They also admit to being a couple of years late, so they’re accelerating (as per their last earnings call)
  - adgjlsfhk1 2y ago
    they are investing differently. Apple has a much more captive audience than the others, and as such is focused on AI services that can be run on device. as such, they aren't doing the blessing edge foundation modern research, but instead putting a ton of money into productionizing smaller models that can be run without giant cloud compute.
herval 2y ago
Trivia: not sure if you’re aware, but there’s billion dollar companies in all these spaces you claim “nobody cares about”. Every single stock broker in the US trades crypto now. Omniverse earns Nvidia a ton of money, Apple earned a billion dollars with a clunky v1 and Meta is selling more and more Quests every half.
- surgical_fire 2y ago
  Yeah. Was not really a world changer as it was claimed to be during hype cycle. Billion dollar valuation for a conpany in a given space is not as impressive as you think it is. Do I need to mention some high profile companies with stellar valuations that are sort of a joke now? We can work together on this ;)
- asadotzler 2y ago
  Apple has spent over $10B on AVP and made back less than 10% of that with no signs of improvement in the next year or two and continued big spending on dev and content. Meta has spent over $50B on Quest and the Metaverse with fewer than 10M MAU to show for it. If you think those are successes, I'll go out and get several bridges to sell you. Meet me here tomorrow with cash.

vineyardmike 2y ago

These sort of investments usually also contain licensing deals. Amazon probably gets Anthropic models they can resell “for free”. The 850M revenue is Anthropic’s, but there is incremental additional revenue to AWS’s hosted model services. AWS was already doing lots of things with Anthropic models, and this may alter the terms more in amazons favor. Are they actually making money? I don’t know, investments aren’t usually profitable on day one. Is this an opportunity for more AWS revenue in the future? Probably.

celestialcheese 2y ago
And access to use anthropics models internally, where you have some guarantees and oversight that your corp and customer data aren't leaking where you don't want it to.

mbesto 2y ago

This is not how it works. First, revenue is irrelevant. Second, the investment isn't a loan that they need to repay. They are getting equity. Third, Anthropic is exclusively using AWS to train its models. Which, yes, means if AWS gives them $4B and it costs them $500M/year to pay for AWS services then after 8 years, the cash is a wash. However this ignores the second point. Fourth, there is brand association for someone who wanted to run their own single tenant instance of Claude whereby you would say "well they train Claude on AWS, so that must be the best place to run it for our <insert Enterprise org>" similar to OpenAI on Azure. Fifth, raising money is a signaling exercise to larger markets who want to know "will this company exist in 5 years?" Sixth, AWS doesn't have its own LLM (relative to Meta, MS, etc.). The market will associate Claude with Amazon now.

warkdarrior 2y ago
> Sixth, AWS doesn't have its own LLM (relative to Meta, MS, etc.). The market will associate Claude with Amazon now. Amazon/AWS has their line of Titan LLMs: https://aws.amazon.com/bedrock/titan/ https://aws.amazon.com/bedrock/titan/
- mbesto 2y ago
  Fair. I wasn't aware of that, for the same reason that if you search Titan vs Claude on HN, you'll find way more mentions of Claude: https://hn.algolia.com/?dateRange=all&page=0&prefix=true&query=titan%20LLM&sort=byPopularity&type=story https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que... https://hn.algolia.com/?dateRange=all&page=0&prefix=true&query=claude&sort=byPopularity&type=story https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que... I think its fair to say this is also a hedging strategy then.
whatshisface 2y ago
The difference between things you'd say like "it's true that..." and "the market will associate..." basically is the definition of a scam.
- mbesto 2y ago

deleted 2y ago

[deleted]

throwup238 2y ago

Last I checked, AWS reserve pricing for one year of an 8x H100 pod costs more than just buying the pod yourself (with tens of thousands left over per server for the NVIDIA enterprise license and to hire people to manage them). On demand pricing is even worse. This is essentially money that they would have spent to build out their cloud anyway, except now they also get equity in Anthropic. Whether or not Anthropic survives, AWS gets to keep all of those expensive GPUs and sell them to other customers so their medium/long term opportunity cost is small. Even if the deal includes cheaper rates the hardware still amortizes over 2-3 years, and cloud providers are running plenty of 5+ year old GPUs so there's lots of money to be made in the long tail (as long as ML demand keeps up). They're not making money yet because there's the $4 billion opportunity cost, but even if their equity in Anthropic drops to zero, they're probably still going to make a profit on the deal. If the equity is worth something, they'll make significantly more money than they could have renting servers. Throw financial engineering on top of that, and they may come out far ahead regardless of what happens to Anthropic: Schedule K capital equipment amortizations are treated differently from investments and AFAICT they can double dip since Anthropic is going to spend most of it on cloud (IANAL). That's likely why this seems to be cash investment instead of in-kind credits. I think that’s what people mean when they say Amazon is making money off the deal. It’s not an all or nothing VC investment that requires a 2-3x exit to be profitable because the money just goes back to AWS’s balance sheet.

AgentOrange1234 2y ago
Yes and it’s also interesting that they mention using Trainium to do the training. I don’t know how much spend that is, but it seems really interesting. Like, if you’re AWS, and you imagine competing in the long run with NVIDIA for AI chips, you need to fund all that silicon development.
- axpy906 2y ago
  They mentioned that in the last investment too. That seems like marketing to me as no one is doing bleeding edge research outside of the NVIDIA CUDA run ecosystem.

phillipcarter 2y ago

This is a way to keep the money printer called AWS Bedrock going and going and going. Don't underestimate the behemoth enterprises in the AWS rolodex who are all but assured to use that service for the next 5+ years at high volume.

wepple 2y ago

Wow, I had no idea Anthropic was doing $850m revenue. I know they have high costs, but as a startup that’s some phenomenal income and validation that they’re not pure speculation like most startups are Edit: founded in 2021 and with 1000 employees. That’s just wild growth.