Amazon’s Anthropic Deal Signals Cloud Sector Turbulence

You know the cloud industry is in upheaval when industry leader Amazon Web Services has to copy a tactic used by its smaller rivals to compete more effectively. The Amazon unit’s decision on Monday to invest up to $4 billion in AI startup Anthropic, as part of a broader deal in which AWS becomes the startup’s “primary cloud provider,” looks a lot like the type of equity-for-business deals AWS previously shunned even as rivals Microsoft Azure and Google Cloud used them to grab business. Then again, before artificial intelligence began threatening to disrupt the cloud, AWS executives presumably felt (correctly) they didn’t need to invest in firms to win their business.

Take the series of deals struck between cloud firms and securities exchanges in the past couple of years: Microsoft bought a 4% stake in London Stock Exchange Group at the same time LSE committed to spending $2.8 billion on Microsoft cloud services, while before that Google Cloud struck a similar deal with CME Group. On both occasions, it looked a lot like the cloud firms were simply buying business. In contrast, AWS won Nasdaq’s cloud business without making an equity investment. That’s a customer win that has a lot more credibility.