It gets complicated.
From CNBC, April 20:
- Amazon has agreed to invest up to $25 billion in Anthropic, on top of the $8 billion that it has poured into the artificial intelligence startup in recent years.
- As part of the announcement, Anthropic said it’s committed to spending more than $100 billion on Amazon Web Services technologies over the next 10 years.
- Amazon said in February that it expects to shell out roughly $200 billion this year on capital expenditures, with most of that money going toward AI infrastructure.
Amazon has agreed to invest up to $25 billion in Anthropic, on top of the $8 billion that it has poured into the artificial intelligence startup in recent years, as part of an expanded agreement to build out AI infrastructure.
In the announcement on Monday, Anthropic said it’s committed to spending more than $100 billion on Amazon Web Services technologies over the next 10 years, including current and future generations of Trainium, Amazon’s custom AI chips. Anthropic said it’s secured up to 5 gigawatts of capacity for training and deploying its Claude AI models.
“Anthropic’s commitment to run its large language models on AWS Trainium for the next decade reflects the progress we’ve made together on custom silicon, as we continue delivering the technology and infrastructure our customers need to build with generative AI,” Amazon CEO Andy Jassy said in a statement.
Amazon’s investment includes $5 billion into Anthropic now, with up to $20 billion in the future tied to “certain commercial milestones,” according to a release. The initial investment is at Anthropic’s latest valuation of $380 billion.
Anthropic said in the release that it will bring nearly 1 gigawatt total of Trainium2 and Trainium3 capacity online by the end of the year.
With all of the major hyperscalers competing to build out AI capacity as quickly as possible, Amazon said in February that it expects to shell out roughly $200 billion this year on capital expenditures, mostly on AI infrastructure.
Amazon’s investment lands just two months after the e-commerce giant agreed to invest up to $50 billion in OpenAI, Anthropic’s chief rival. The two AI companies have been racing to convince investors of their strengthening positions ahead of potential IPOs that could land as soon as this year. OpenAI executives have been criticizing Anthropic in recent months for making a “strategic misstep to not acquire enough compute.”...
....MUCH MORE
We're going to have to update the Advantage Flywheels schematic:
In the meantime here are a few posts that tried to explain what was coming.
July 2018 - Why Do the Biggest Companies Keep Getting Bigger? It’s How They Spend on Tech"
May 2025 - "Big techs’ AI empire"
...As artificial intelligence comes more and more to the fore, the advantages accruing to those companies that can afford to make use of their data and custom train the machines will act as advantage flywheels that shift the distribution of profits from the normal Pareto: 80% of the loot goes to the top 20% of businesses to perhaps as much as 95% of all the profits going to the top 5% of businesses.
Okay, more than a few:
"The 'new normal' of growth stock dominance"
The Big Get Bigger: "The trade war uncovers new economies of scale"
"The economic divide between big and small companies is growing"
Competitive Advantage and Feedback Loops
Flywheel Effect: Why Positive Feedback Loops are a Meta-Competitive Advantage
"America's Biggest Firms' Moat Is Becoming Impregnable" (TSLA; NVDA; GOOG)
The announcement at the end of August that Tesla was going live with their supercomputer — Elon Got Himself A Supercomputer: "Tesla's $300 Million AI Cluster Is Going Live Today" (TSLA)—reminded me of this piece at ZeroHedge, last month. We'll be back with more on Morgan Stanley's Tesla note later today but for now the TL;dr is "To the victor go the spoils" or "The rich get richer" or "Those who can afford a supercomputer will get closer to discovering the profitability (if any) of AI than those who can't afford a supercomputer."
In Nvidia's World, If You (and your company) Don't Have Money You Will Not Be Able To Compete (NVDA)
The advantage flywheels keep spinning and reinforcing each other to the point that the Pareto distribution of profits - 20% of companies reap 80% of the profits - is becoming Super-Pareto where 5% of the companies reap 95% of the profits and is approaching Hyper-Pareto at maybe 2% of companies reaping 98% of profits.
It all comes down to having the resources to keep up.
I watched Mr. Huang give the keynote and it's all a bit much to digest before firing out comments that would make any sense at all so here are some of today's headlines to give a taste of what the intro paragraph is based on.
These are Nvidia's press releases via GlobeNewswire....
"Elon Musk says any company that isn’t spending $10 billion on AI this year like Tesla won’t be able to compete" (TSLA)
This.
This is such an important concept to grasp. It's the advantage flywheels, the rich get richer, winner-take-all reality of business in 2024....
"Jensen Huang’s extraordinary interview" (NVDA)
And many more, we are playing for keeps.
The Hyper-Pareto Distribution Of Profits Is Happening Right Now (plus an anniversary)
It's not some cutesy management* fad or pop insight like "Business secrets of Genghis Khan."
To the rich go the profits and internalizing that fact makes the rest of this portfolio construction/fund management/investing stuff easier to conceptualize and execute.
And AI is accelerating the already extant dynamic....
Just to
reiterate, every incremental advantage that a company can afford does
not affect income production in isolation. They accrete in sometimes
unforeseeable combinations.
That's it, business, companies and investing in the 21st century. Learn it, love it, live it.
Or not, your call.
