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Amazon said Monday it has agreed to invest up to $4 billion in AI startup Anthropic as the e-commerce group steps up rivalry against Microsoft, Meta, Google and Nvidia in the fast-growing red hot sector that many technologists believe could be the next great frontier.

The e-commerce group said it will initially invest $1.25 billion for a minority stake in Anthropic, which like Google’s Bard and OpenAI, also operates a generative AI chat platform. As part of the deal, Amazon has an option to increase its investment to a total of $4 billion in Anthropic, Amazon said.

TechCrunch reported exclusively earlier this year that Anthropic, which also counts Google as an investor, had planned to raise as much as $5 billion over the next two to three years. Anthropic, which earlier this month announced the launch of its first consumer-facing premium subscription plan for its AI-powered, text analyszing chatbot Claude 2, plans to build a “frontier model” — tentatively called “Claude-Next” that are 10 times more capable than today’s most powerful AI, according to an investor deck TechCrunch obtained earlier this year.

But this development, the startup had warned, will require a billion dollars in spending over the next 18 months.

As part of a deal with Amazon, Anthropic will use AWS as a primary cloud provider for mission critical workloads, including safety research and future foundation model development, the e-commerce group said. Anthropic will additionally use AWS Trainium and Inferentia chips to build, train, and deploy its future foundation models.

“We have tremendous respect for Anthropic’s team and foundation models, and believe we can help improve many customer experiences, short and long-term, through our deeper collaboration,” said Andy Jassy, Amazon chief executive, in a statement.

“Customers are quite excited about Amazon Bedrock, AWS’s new managed service that enables companies to use various foundation models to build generative AI applications on top of, as well as AWS Trainium, AWS’s AI training chip, and our collaboration with Anthropic should help customers get even more value from these two capabilities.”

Anthropic, which also counts Spark Capital, Salesforce, Sound Ventures, Menlo Ventures, and Zoom among its backers, has now raised a total of $2.7 billion. It was valued at about $5 billion in May this year when it secured $450 million.

The deal with Anthropic gives Amazon, which is increasingly flexing its own muscles around AI, a front row seat at one of the fastest growing AI startups. Anthropic chief executive and co-founder Dario Amodei told TechCrunch Disrupt audience last week that he doesn’t see any barriers on the horizon for his company’s key technology.

“The last 10 years, there’s been this remarkable increase in the scale that we’ve used to train neural nets and we keep scaling them up, and they keep working better and better,” he said last week. “That’s the basis of my feeling that what we’re going to see in the next 2, 3, 4 years… what we see today is going to pale in comparison to that.”

Amazon said as part of the deal, Anthropic has made a “long-term” commitment to provide AWS customers around the world with access to future generations of its foundation models via Amazon Bedrock, AWS’s fully managed service that provides secure access to the industry’s top foundation models. In addition, Anthropic will provide AWS customers with early access to unique features for model customization and fine-tuning capabilities.

More to follow.