Cloud Giants Are Making It Rain for AI

Amazon's big investment in Anthropic shows what's really at stake in the chatbot wars: binding customers more tightly to Big Tech cloud providers.

- GEOFF COLVIN AND KYLIE ROBISON

TECH COGNOSCENTI media responded and major in unison this fall when Amazon Web Services announced its $1.25 billion investment in Anthropic, a generative AI startup. AWS was scrambling to stay relevant in the post-ChatGPT world, they all agreed, "trying to keep pace" with Microsoft and Google (New York Times) or "racing to catch" them (CNBC) because it "doesn't look like the leader" (Business Insider).

Never mind that AWS is the world's dominant cloud provider, far larger than Microsoft's Azure or Alphabet's Google Cloud. The conventional wisdom was that cloud services had abruptly entered a new phase - Cloud 2.0, in which giants must compete based on how well their software, storage, and other tools support AI - and AWS wasn't equipped to win under the new rules.

When asked if AWS is "catching up," CEO Adam Selipsky doesn't explicitly deny it. "We're about three steps into a 10K race," he tells Fortune. "Which runner is a half-step ahead or behind? It's not really the important question. The important questions are, who are the runners? What does the course look like, what do the spectators and officiators of the race look like, and where do we think the race is going?"

Selipsky's message to doubters, in other words, is to stop hyperventilating and stay focused on the long term. It's exactly the message you'd expect from a company that has indeed seemed a half-step behind on AI. But it's also a message Amazon has preached internally with great success since its founding - to "accept that we may be misunderstood for long periods of time," to quote its famous Leadership Principles.

Still, it's reasonable for customers, competitors, and investors to wonder whether AWS's Anthropic investment signals a broader strategic problem: In the Cloud 2.0 era, will AWS fall from its throne? And long term, who will be AI's dominant global purveyor?