I'm no economist, but how exactly does this make sense? Amazon is basically just giving them 5B which will then be used to repay them back 20x that amount??
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The $5B isn't a gift. Amazon is buying shares for $5B, and they're getting a spending commitment. I don't have any insight into the agreement, but on a ten year $100B spending commitment, I would expect $5B to be spent in no more than 3 years, and likely sooner.
In my reading, Amazon is giving $5B of usage credits in exchange for shares. If Anthropic works out, it's a good deal for Amazon. If it doesn't, they lose on their invesment sheet, but they got ~ $5B in revenue, so it looks good on their operating sheet. And it helped justify a build out that they can sell to others.
For Anthropic, this lets them operate for more time without having to make numbers work. If Anthropic works out, they'll figure out the $100B commitment later. If it doesn't work out, it's not their problem.
It's probably faster to build up amazon's capacity with amazon's money than to build owned capacity with someone else's money at the scale they're looking to build out.
> Amazon is investing $5 billion in Anthropic today, with up to an additional $20 billion in the future. This builds on the $8 billion Amazon has previously invested.
> Today’s agreement will quickly expand our available capacity, delivering meaningful compute in the next three months and nearly 1GW in total before the end of the year.
They need a bunch of compute, now.
5 billion now vs 10 billion per year in spend on compute that you had to buy anyways (not necessarily at aws)
in exchange for service that presumably a) costs something to amazon to operate (so not pure 100B profit) and b) anthropic would have to spend anyway to operate their business.
so basically ...
you could view this as a kind of discount, but instead of paying less later, you get some cash now and then pay full later.
I was wondering the same thing. I think it's something like, they're going to pay for infra anyways, so Amazon pushes them to allocate their spend to AWS in exchange for 5B.
I'd bet that Amazon is getting access to chat data (no matter what Anthropic says publicly) and possibly even the ability to change the model to drive business to either Amazon retail or AWS.
"Claude I'm evaluating whether I should host my app on AWS or Google Cloud. Provide me with an analysis on my options." "After a detailed analysis, AWS is clearly your better option."
Let me inject something as an ex-AWS employee: Amazon doesn't capture very much value from Bedrock inference of the Anthropic models (or, put another way, Amazon gave Anthropic an outsized share of the Claude Bedrock revenue). If it was me at the negotiating table, I would be asking for a larger cut of Bedrock revenue rather than violating customer trust by getting chat content access.