Raphael Stevens

Amazon is spending billions more to back an artificial intelligence startup as it looks for an edge in the new technology arms race.  
The tech and cloud giant said Wednesday it would spend another $2.75 billion backing Anthropic, adding to its initial $1.25 billion check.
It’s the latest in a spending blitz by cloud providers to stay ahead in what’s viewed as a new technology revolution.  

Jakub Porzycki | Nurphoto | Getty Images

Amazon is making its largest outside investment in its three-decade history as it looks to gain an edge in the artificial intelligence race. 
The tech giant said it will spend another $2.75 billion backing Anthropic, a San Francisco-based startup that’s widely viewed as a front-runner in generative artificial intelligence. Its foundation model and chatbot Claude competes with OpenAI and ChatGPT.

The companies announced an initial $1.25 billion investment in September, and said at the time that Amazon would invest up to $4 billion. Wednesday’s news marks Amazon’s second tranche of that funding.
Amazon will maintain a minority stake in the company and won’t have an Anthropic board seat, the company said. The deal was struck at the AI startup’s last valuation, which was $18.4 billion, according to a source. 
Over the past year, Anthropic closed five different funding deals worth about $7.3 billion. The company’s product directly competes with OpenAI’s ChatGPT in both the enterprise and consumer worlds, and it was founded by ex-OpenAI research executives and employees.
News of the Amazon investment comes weeks after Anthropic debuted Claude 3, its newest suite of AI models that it says are its fastest and most powerful yet. The company said the most capable of its new models outperformed OpenAI’s GPT-4 and Google’s Gemini Ultra on industry benchmark tests, such as undergraduate level knowledge, graduate level reasoning and basic mathematics.
“Generative AI is poised to be the most transformational technology of our time, and we believe our strategic collaboration with Anthropic will further improve our customers’ experiences, and look forward to what’s next,” said Swami Sivasubramanian, vice president of data and AI at AWS cloud provider.

Amazon’s move is the latest in a spending blitz among cloud providers to stay ahead in the AI race. And it’s the second update in a week to Anthropic’s capital structure. Late Friday, bankruptcy filings showed crypto exchange FTX struck a deal with a group of buyers to sell the majority of its stake in Anthropic, confirming a CNBC report from last week.

Read more CNBC reporting on AI

What is generative AI?

The term generative AI entered the mainstream and business vernacular seemingly overnight, and the field has exploded over the past year, with a record $29.1 billion invested across nearly 700 deals in 2023, according to PitchBook. OpenAI’s ChatGPT first showcased the tech’s ability to produce human-like language and creative content in late 2022. Since then, OpenAI has said more than 92% of Fortune 500 companies have adopted the platform, spanning industries such as financial services, legal applications and education.
Cloud providers like Amazon Web Services don’t want to be caught flat-footed.
It’s a symbiotic relationship. As part of the agreement, Anthropic said it will use AWS as its primary cloud provider. It will also use Amazon chips to train, build and deploy its foundation models. Amazon has been designing its own chips that may eventually compete with Nvidia. 
Microsoft has been on its own spending spree with a high-profile investment in OpenAI. Microsoft’s OpenAI bet has reportedly jumped to $13 billion as the startup’s valuation has topped $29 billion. Microsoft’s Azure is also OpenAI’s exclusive provider for computing power, which means the startup’s success and new business flows back to Microsoft’s cloud servers.
Google, meanwhile, has also backed Anthropic, with its own deal for Google Cloud. It agreed to invest up to $2 billion in Anthropic, comprising a $500 million cash infusion, with another $1.5 billion to be invested over time. Salesforce is also a backer.
Anthropic’s new model suite, announced earlier this month, marks the first time the company has offered “multimodality,” or adding options like photo and video capabilities to generative AI.
But multimodality, and increasingly complex AI models, also lead to more potential risks. Google recently took its AI image generator, part of its Gemini chatbot, offline after users discovered historical inaccuracies and questionable responses, which circulated widely on social media.
Anthropic’s Claude 3 does not generate images. Instead, it only allows users to upload images and other documents for analysis.
“Of course no model is perfect, and I think that’s a very important thing to say upfront,” Anthropic co-founder Daniela Amodei told CNBC earlier this month. “We’ve tried very diligently to make these models the intersection of as capable and as safe as possible. Of course there are going to be places where the model still makes something up from time to time.”
Amazon’s biggest venture bet before Anthropic was electric vehicle maker Rivian, where it invested more than $1.3 billion. That too, was a strategic partnership. 
These partnerships have been picking up in the face of more antitrust scrutiny. A drop in acquisitions by the Magnificent Seven — Amazon, Microsoft, Apple, Nvidia, Alphabet, Meta and Tesla — has been offset by an increase in venture-style investing, according to Pitchbook.

Big Tech’s investments

AI and machine-learning investments from those seven tech companies jumped to $24.6 billion last year, up from $4.4 billion in 2022, according to Pitchbook. At the same time, Big Tech’s M&A deals fell from 40 deals in 2022 to 13 last year. 
“There is a sort of paranoia motivation to invest in potential disruptors,” Pitchbook AI analyst Brendan Burke said in an interview. “The other motivation is to increase sales, and to invest in companies that are likely to use the other company’s product — they tend to be partners, more so than competitors.”
Big Tech’s spending spree in AI has come under fire for the seemingly circular nature of these agreements. By investing in AI startups, some observers, including Benchmark’s Bill Gurley, have accused the tech giants of funneling cash back to their cloud businesses, which in turn, may show up as revenue. Gurley described it as a way to “goose your own revenues.”
The U.S. Federal Trade Commission is taking a closer look at these partnerships, including Microsoft’s OpenAI deal and Google and Amazon’s Anthropic investments. What’s sometimes called “round tripping” can be illegal — especially if the aim is to mislead investors. But Amazon has said that this type of venture investing does not constitute round tripping.
FTC Chair Lina Khan announced the inquiry during the agency’s tech summit on AI, describing it as a “market inquiry into the investments and partnerships being formed between AI developers and major cloud service providers.”
Correction: This article has been updated to clarify the deals Anthropic has closed in the past year.

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Allocating just 2% to 3% of a portfolio to cryptocurrency like bitcoin is “more than enough,” according to one certified financial planner.
Crypto is an incredibly volatile asset, experts said.
Whether and how much a person invests will depend on their capacity and tolerance for risk.

Tara Moore | Stone | Getty Images

Katherine Dowling has an analogy that may be useful for investors thinking of buying cryptocurrency like bitcoin and wondering what amount is appropriate.
It’s “like cayenne pepper,” said Dowling, general counsel and chief compliance officer at Bitwise Asset Management, a crypto money manager. “A little goes a long way” in a portfolio, she explained earlier this month at Financial Advisor Magazine’s annual Invest in Women conference in West Palm Beach, Florida.

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Ivory Johnson, a certified financial planner and member of CNBC’s Financial Advisor Council, said the description is apt.
“The more volatile an asset class is, the less of it that you need,” said Johnson, who founded Delancey Wealth Management, based in Washington, D.C.

A 2% or 3% allocation is ‘more than enough’

Cryptocurrencies are digital assets, a category that should be considered an “alternative investment,” Johnson said.
Other types of alts may include private equity, hedge funds and venture capital, for example. Financial advisors generally consider them separate from traditional portfolio holdings like stocks, bonds and cash.

Allocating 2% or 3% of one’s investment portfolio to crypto is “more than enough,” Johnson said.
Let’s say an asset grows by 50% this year, and an investor holds a 1% position. That’s like having a 5% position in another asset that grew 10%, Johnson said.

Whether investors buy in to crypto — and how much they hold — will depend on their tolerance and capacity for risk, Johnson said.
For example, long-term investors in their mid-20s can afford to take more risk because they have ample time to make up for losses. Such a person may be able to stomach substantial financial losses and may reasonably hold 5% to 7% of their portfolio in crypto, Johnson added.
However, that allocation would most likely not be appropriate for a 70-year-old investor who can’t afford to subject their nest egg to major losses, he said.
“Bitcoin and other cryptocurrencies are a very speculative investment and involves a high degree of risk,” investment strategists at Wells Fargo Advisors wrote in a note last year. “Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment, and a potential total loss of their investment.”

Crypto is ‘an incredibly volatile asset’

Crypto prices have been on a wild ride lately.
Bitcoin, for example, surged to an all-time high earlier in March. It topped $73,000 at its peak, though it has since retreated to less than $69,000.
Bitcoin prices had collapsed heading into 2022, and shed about 64% that year to below $20,000. By comparison, the S&P 500 stock index lost 19.4%.
Prices have since quadrupled from their low point in November 2022, as of late Wednesday. They’ve soared more than 50% year to date, while the S&P 500 is up about 9%.

Bitcoin is about eight times as volatile as the S&P 500, Johnson wrote in a Journal of Financial Planning article in December 2022, citing data from the Digital Asset Council for Financial Professionals.
The Crypto Volatility Index was about six times higher than the CBOE Volatility Index as of Wednesday.
“It’s still an incredibly volatile asset,” Bitwise’s Dowling said. “It’s not for everybody.”
Investing in crypto became easier for many investors after the Securities and Exchange Commission approved a slew of spot bitcoin exchange-traded funds in January, in a first for the asset class.
Investors may wish to consider dollar-cost averaging into crypto, Johnson said. This entails buying a little bit at a time, until reaching one’s target allocation. Investors should also rebalance periodically to ensure big crypto profits or losses don’t tweak one’s target allocation over time, he said.

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U.S. business leaders met with Chinese President Xi Jinping on Wednesday, the latest of Beijing’s efforts to bolster foreign investment in China amid tensions with the U.S.
The executives and others from major international companies were in Beijing this week for the annual China Development Forum, which ran from Sunday to Monday.
A combination of geopolitical tensions, regulatory uncertainty and slower economic growth have made it more challenging for foreign businesses in China.

China’s President Xi Jinping speaks at the “Senior Chinese Leader Event” held by the National Committee on US-China Relations and the US-China Business Council on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in San Francisco, California, U.S., November 15, 2023. 
Carlos Barria | Reuters

BEIJING — U.S. business leaders met with Chinese President Xi Jinping on Wednesday, the latest of Beijing’s efforts to bolster foreign investment in China amid tensions with the U.S.
Blackstone founder Stephen Schwarzman, Qualcomm President and CEO Cristiano Amon, Bloomberg Chair Mark Carney and FedEx President Rajesh Subramaniam were among the attendees, according to state media.

The companies did not immediately respond to CNBC’s requests for comment.
Earlier reports described the meetings as a follow-up to Xi’s dinner with U.S. business executives in San Francisco in November following the Chinese president’s meeting with President Joe Biden.
The executives and others from major international companies were in Beijing this week for the annual China Development Forum (CDF), which took place Sunday to Monday.
Top executives of multinational companies typically attend the state-organized forum, which is billed as the “first major state-level international conference” after China’s annual parliamentary meetings in early March.
The forum this year coincided with other efforts to attract foreign business. Chinese authorities hosted an “Invest in China Summit” and formally eased once-stringent data export requirements.

The Cyberspace Administration of China late Friday formally released long-awaited new rules that eliminate government oversight of overseas information sharing if regulators haven’t categorized it as “important data.” Those rules were effective immediately.

What we have is businesses getting stuck in the middle, because the U.S. has been more involved in business than I can remember.

Carlos Gutierrez
former U.S. Secretary of Commerce

“This is a significant step forward in terms of transparency and our member companies now have much more clarity as they look to comply with these rules,” Sean Stein, chair of the American Chamber of Commerce in China, said in a statement.
“Notably, these changes strengthen the role of industry-specific regulators to determine what data should be deemed important in their sectors,” he said, “and also presumes that data is not important unless specifically declared as such.”
However, a combination of geopolitical tensions, regulatory uncertainty and slower economic growth have made it more challenging for foreign businesses in China.
“What we have is businesses getting stuck in the middle, because the U.S. has been more involved in business than I can remember,” Carlos Gutierrez, former U.S. Secretary of Commerce, said Wednesday on CNBC’s “Squawk Box Asia.”

“We are in that period of time of confusion of different ideologies,” Gutierrez said. “We will get through it. Nothing is permanent and eventually the numbers will show that globalization is a better model than self-sufficiency or nationalism. But regrettably we are in that moment in time and will be in that for a while.”
Biden, who is running for reelection in November, has released incentives for boosting industrial development in the U.S. His administration has also used export controls to restrict U.S. companies from selling advanced semiconductor technology to China.

… foreign companies share the same lack of confidence and worries about an uncertain future that is felt amongst much of China’s domestic industry.

Scott Kennedy
Center for Strategic and International Studies

To help foreign businesses better navigate the China market, former SwissCham China executive director Peter Bachmann proposed the creation of a dedicated executive based at a company’s global headquarters.
“We have to deal now with two different levels. One is the business level, and one is the political one. Before it was just the business level,” said Bachmann, a long-time Shanghai resident and board member of the China Centre at the University of Applied Sciences and Arts Northwestern Switzerland (FHNW).
He said that makes the case for a so-called “Chief China Officer,” whose job includes helping the main office understand China better, and bridge the gap between the headquarters and the leadership team in China.

Looking for economic clarity

For businesses considering China investment plans, the country’s near-term growth outlook is another factor.
“The U.S. business delegation [at CDF] was substantially larger than last year, the conference organizers gave them a more visible platform, and they took advantage of that opportunity to speak up,” said Scott Kennedy, senior advisor and trustee chair in Chinese business and economics at the Center for Strategic and International Studies in Washington, D.C.
“The Chinese party-state tried to send a clear signal that foreign businesses are welcome, but foreign companies share the same lack of confidence and worries about an uncertain future that is felt amongst much of China’s domestic industry,” Kennedy said.
The Chinese government announced at its parliamentary meeting this month the country would target growth of around 5%.

Several analysts have said such a goal is ambitious given the current levels of announced stimulus and the drag from the massive real estate sector. Top government officials signaled during the parliamentary meeting that Beijing could increase its support, but they did not elaborate.
The China Development Form this year “offered no new insights into the challenges China faces and any new policy remedies being considered,” said Stephen S. Roach, senior fellow at Yale Law School’s Paul Tsai China Center.
Instead, the forum focused more on what had already been shared at the parliamentary meeting earlier in the month, said Roach, who said he’s attended CDF every year except for the first one in 2000.
“To me it seemed more like a placeholder for the upcoming Party Third Plenum that could provide a stronger hint of any new reforms or policy strategy,” Roach said.
China’s ruling Communist Party typically holds a “Third Plenum” every five years to discuss longer-term aspects of the economy. The meeting has been widely anticipated since it was expected to take place late last year.

Non-U.S. foreign investment

Foreign direct investment in China in 2023 fell to a three-year low, according to official data. Since the easing of pandemic-era border controls early last year, China has doubled down on efforts to attract foreign capital.
The Ministry of Commerce and Beijing city held the first “Invest in China Summit” on Tuesday, and claimed about 140 business representatives attended.
“Investing in China is to invest in the future,” China’s Vice President Han Zheng declared in an opening speech, according to a CNBC translation of his Mandarin-language remarks. He emphasized China’s large market, industrial supply chain, and pointed out how China has worked on issues such as data exports and equal market treatment for foreign businesses.
While the U.S. and European businesses face greater geopolitical considerations when it comes to China operations, Middle Eastern capital has been eyeing the market.
“When it comes to opportunities for Aramco and China to join hands, the bottom line is that the sky is the limit!” Amin H. Nasser, president and CEO of the Saudi energy giant, said in a speech Tuesday at the Invest in China Summit.

He noted how Aramco and its chemicals subsidiary SABIC have made deals in the last year for more than $20 billion in chemicals investments in China. Nasser also said that venture capital is a “strategic area for collaboration,” and pointed out how Aramco in January more than doubled its funding for its VC arm to $7.5 billion.
Japanese companies are also looking for investment opportunities this year in China’s robotics, factory automation and car industry, Toyoki Oka, secretary general of the Japan-China Investment Promotion Agency, said on the sidelines of the summit. He said such investments would be for sales to China, and eventually exports to Southeast Asia.
— CNBC’s Eunice Yoon contributed to this report. More

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