They buy whatever they want that might help their cause. This quarter alone Alphabet's free cash flow is $22B. This is a small bet for them. Why wouldn't they spend a small fraction in a key area for them?
Of course Google would prefer Anthropic to beat (or at least be competitive with) OpenAI, but only if they can't do it themselves.
Has Google management lost confidence in its own AI capability? Or are there so many leading AI researchers that refuse to work for Google?
To me this looks like Google could be in big trouble.
My point is that this is not how a healthy company can think about its most strategic activities. This sort of failure is not something you can hedge against.
It's like Apple hedging against the risk of failing to keep iPhone competitive by investing in some other device maker that might be able to compete with Samsung.
By failure I don’t mean they can’t make an LLM product, I mean the LLM product doesn’t have majority market share to be used as an ad surface (or other monetization strategy). That’s only partly dependent on their research and modeling efforts. The revenues they could make from an LLM api business are too small to register for them right now, the market share and product work is also important.
If Google fails to compete in AI, they will lose search and some competitor will siphon off all their advertisig revenue.
This is all coinciding with regulators taking a closer look at all the other ways in which Google protects its search monopoly. You know, the ones that are not so much based on merit.
Google is at risk of losing both its technology leadership and its grip on distribution channels at the same time.
It doesn't know how to keep new information flowing into the AI.
If AI replaces the need to visit the original website and everyone just stays on google.com then a great deal of the web will just stop being updated because nobody is reading it and nobody will read it.
That's googles problem. Frankly it's a problem for every company who wants to try and supplant google search with AI.
When first LLMs and ChatGPT came about, I thought it was just another hype but the web, and the web search industry hangs in a balance (Google in particular).
P.S.
>If AI replaces the need to visit the original website and everyone just stays on google.com then a great deal of the web will just stop being updated because nobody is reading it and nobody will read it.
But even today and for a very long time as a matter of fact, you can use RSS for website updates and read them in your RSS reader and yet classic web still didn't fade away.
You should first ask yourself why Amazon became a minority shareholder in a company already invested in by Google.
So this bet doesn't have anything to do with AI, it is a competition between AWS and Google cloud. They are competing over who gets to sell shovels in a gold rush.
But Google is at the same time propping up a competitor while Amazon is propping up a purely complementary service.
So when they just have to pull x billions out, it's not just liquid assets, but they will have stage and sell assets representing those funds.
So since it's not just cash, how does a company of this size, then determine what assets to sell? And if those assets are actually invested in something, or representing an entity of some sorts, how do they assess whether or not it will cause any damage or loss of profitability? The crux is, is the risk two fold? First let go of whatever the assets were invested in (one), and then buy a new company and hope it has ROI (two).
Or is it actually possible to have 1.5 billion dollars laying around in cash somehow? I know money is a made up idea, but that is still a big number for a bank/banks/asset holding company to just say good for and expect some kind of real monetary tangible value behind the symbolic currency.
Cash is a very specific thing on a balance sheet. It has to be cash or very close to cash. "Equivalent", something like a <90d treasury that has virtually zero interest rate risk.
So when someone says "Google has 100B cash" it would mean literally cash or close enough to cash that it doesn't matter.
You'll note, if you read the 10Q, it's also wrong. Google has 30B in cash and cash equivalents, and an additional 90B in marketable securities - stocks, and bonds with >90d maturity.
That said, "marketable securities" are extremely liquid.
> Or is it actually possible to have 1.5 billion dollars laying around in cash somehow?
Yes? Depending on what you mean by "laying around in cash". It's not literal physical dollar bills, it's numbers in a computer.
1.5B is not much for a company that size. I'd image that is payroll and accounts payable for like a week or two?
> I know money is a made up idea, but that is still a big number for a bank/banks/asset holding company to just say good for and expect some kind of real monetary tangible value behind the symbolic currency.
Bank of America alone has like 2 trillion in US deposits.
Scanning the players will show you how some of them solve some of the problems you mention.
Yes. 1.5 billion is less than Google's weekly operating expense.
>So since it's not just cash, how does a company of this size, then determine what assets to sell? And if those assets are actually invested in something, or representing an entity of some sorts, how do they assess whether or not it will cause any damage or loss of profitability?
There's a lot of smart people under CFO that determine that.
Then again, shareholders usually have less risk tolerance with companies than investors with hedge funds, so the two aren't really comparable either. (But I assume your 1% number is for more risk-averse funds? Hedge funds regularly make much bigger bets than that)
However, Very Bad Things™ can happen long before they have monopoly on violence. And violence where? Large companies operate in weak jurisdictions, not only in their home states of Maryland and Ireland.
Nobody (company, nation or gang) needs a monopoly on violence to become dangerous.
Also, the Medici family was initially a wool company, then grabbed power in their homeland, kept it for about three centuries and somewhere along the way produced descendants that ruled over much of Europe. Similarly, the fascist uprising that gave power to Franco over Spain was largely privately funded by a bank [1] and I seem to remember that the German Nazi party was largely funded by industrialists and bankers [2] until reached power.
So, I'd say that companies overthrowing their home country's government has unfortunately been a thing for quite some time.
[1] https://en.wikipedia.org/wiki/Juan_March
[2] https://www.bibliotecapleyades.net/sociopolitica/wall_street...
Part of the job of being a consumer of media is understanding the bias of what we're consuming, determining whether it skews the news, and possibly counter-balancing by consuming other media with different bias. And yes, it's lots of work and most people aren't willing to spend the time doing that.
In the context of capitalism, it’s for the same reasons.
The goal of Cloud is to sell as much compute as possible to the rest of the world. So, they want as many foundational models that are running on their cloud.
Since OpenAI is married to Azure, Google and Amazon are trying hard to get the remaining. Of course GCP can just bet on Gemini, but if you are the head of GCP you wouldn't put all your eggs in one basket. I mean the essence of cloud is redundancy and load distribution. It applies to business strategies too
I was analyzing this as not putting all your eggs in one basket in terms of AI capabilities, but you are right that it's probably also true in terms of cloud sales.
Helping fund Anthropic and assuring that there is visible competition also makes it more likely that LLM-backend-agnostic services will exist and a culture of evaluating offerings rather than just automatically going to OpenAI is established, which puts Google in a better position if they really are ahead in basic science and just suffering from a past lack of commeecialization focus that is remedied by the recent reorg and refocusing of Google’s AI efforts.
(Also, it may help avoid the situation where Google’s lack of product and and the financial relationship between other cloud providers and the AI vendors that have competitive product means that Azure is the favored enterprise platform for OpenAI, Amazon works out something similar with Anthropic, and Google Cloud loses competitive position because Google AI isn’t competitive and Google doesn't have the right partnerships.)
Open AI is now basically Microsoft. Copilot in all your docs, etc.
If only Amazon was the large investor in Anthropic it encourages a similar exclusive partnership to develop where Anthropic ends up powering Alexa with proprietary access to its SotA models.
Google throwing money that way keeps Anthropic from becoming too siloed into a partnership with one cloud direct competitor, and also helps fund another competitor to the company in the lead who is partnered with a different cloud direct competitor.
I wouldn't read into it beyond that, and certainly not in thinking this reflects product shortcomings or advantages.
2. $2B is a drop in the bucket for Google. Even after the severe fall this month, the Google Market Cap is $1.536 Trillion. Consider the investment as a % of market cap
3. It is undeniable that small players can move fast, so even if Google's AI is amazing, the slope is probably not as high as a fast moving startup
4. These products have 2nd order revenue boosters -- you might use Anthropic's marketplace app, as a theoretical example, but you end up spending much more on compute/storage/cloud in doing so, helping the cloud majors
Market cap does matter because you can use it to gauge how easily Google could hypothetically raise the same amount[1] by issuing additional shares without a shareholder revolt.
1. Or complete an all-stock deal or acquisition.
Amazon invested not $1.5B but $4B in Anthropic one month ago [0].
[0] https://www.reuters.com/markets/deals/amazon-steps-up-ai-rac...
I don't understand the trope on HN that OpenAI is a competitor to Google. I do not think Google has the appetite or DNA to be purely an AI API vendor; I don't think selling APIs is as profitable as Google current business. Google investing in Anthropic is a good, cheap hedge against the low-probability (IMO) event that LLMs somehow displace the search results page and display ads.
2B is too little too late as well. It’s almost embarrassing. MS dumped 10B into OpenAI. 2B is a lukewarm, visionless move.
If MS actually bought OpenAI, it would be a different story.
> Google will have multiple very large clusters across their infrastructure for training and by far the lowest cost per inference, but this won’t automatically grant them the keys to the kingdom. If the battle is just access to compute resources, Google would crush both OpenAI and Anthropic.
> Being “GPU-rich” alone does not mean the battle is over. Google will have multiple different clusters larger than their competitors, so they can afford to make mistakes with pretraining and trying more differing architectures. What OpenAI and Anthropic lack in compute, they have to make up in research efficiency, focus, and execution.
https://www.semianalysis.com/p/amazon-anthropic-poison-pill-...
On top of that they have lots of training data: youtube, gmail, google docs, google drive, indexed www for google search, lots of data from those fancy cars driving around for google street project and probably still some data from google+
Safe hedge imo.