Key Points:
- Google will invest an initial $10 billion in cash into artificial intelligence startup Anthropic at a $350 billion valuation.
- The tech giant could invest an additional $30 billion if Anthropic successfully hits specific performance targets over time.
- Anthropic recently secured a separate $5 billion investment from Amazon as it desperately hunts for more computing power.
- The Pentagon recently labeled Anthropic a supply-chain risk after a dispute over military use of the AI technology.
Google is doubling down on its massive bets in the artificial intelligence sector. The technology giant recently announced it will invest an initial $10 billion in cash directly into the AI startup Anthropic PBC. The deal strengthens the highly complex relationship between the two companies, which simultaneously operate as close partners and fierce rivals in the ongoing race to build the world’s smartest artificial intelligence.
Anthropic confirmed the financial details of the massive agreement on Friday. The startup stated that Google is committing the initial $10 billion at a pre-money valuation of $350 billion. This matches the valuation Anthropic carried during a massive funding round in February. If Anthropic meets certain performance targets, the Alphabet-owned company has agreed to invest another $30 billion in the startup. Furthermore, Google promised to support a massive expansion of Anthropic’s overall computing capacity to help the startup grow.
Anthropic is currently on a massive fundraising spree. The company desperately needs cash to support the breakout success of Claude Code, a highly popular new AI agent that dramatically speeds up the process of writing complex computer software. Earlier this week, the startup announced it had snagged a separate $5 billion investment from Amazon, which also sits at a $350 billion valuation. That specific deal included a similar option for Amazon to inject another $20 billion over time. The massive interest comes after Anthropic raised $30 billion in February, prompting some eager investors to try to back the firm at a staggering valuation of $800 billion or more.
The partnership with Google is not just about raw cash; it heavily involves physical computer hardware. Anthropic is a major customer of Google’s custom computer chips and cloud services. Google desperately wants to grow its cloud computing business as its main traditional moneymaker, internet search advertising, slowly matures and stops growing as fast. Under the new deal, Google Cloud will provide 5 gigawatts of raw computing capacity to Anthropic over the next five years, with the potential for several more gigawatts to follow. To put that massive number in perspective, a single gigawatt is enough energy to power roughly 750,000 average US homes at any given time.
This massive new energy deal marks a massive expansion of an agreement originally announced earlier this month between Anthropic, Google, and hardware manufacturer Broadcom Inc. Wall Street loved the news of the massive partnership. Shares of Google ticked up more than 1% on Friday afternoon following the announcement, trading steadily at roughly $341 a share.
Hardware remains the biggest bottleneck in the AI industry. Google’s custom tensor processing units, commonly called TPUs, are among the best alternatives to Nvidia’s highly sought-after chips. This high performance makes the TPUs a scarce and incredibly precious resource for Anthropic and dozens of other AI developers operating in a business that requires tremendous, almost unimaginable amounts of raw computing power.
Because of this massive demand for its products, Anthropic is actively seeking additional infrastructure. The startup, which is reportedly considering a massive initial public offering as soon as October, needs the hardware to keep up with its users. The Claude Code product has quickly become the go-to tool for software engineers across Silicon Valley, including many who work at Google. This sudden popularity spurred a frantic scramble across the rest of the tech industry to catch up. Furthermore, Anthropic’s new Cowork agent, which allows regular people to complete tasks without any coding skills, is also growing rapidly.
The ties between the two companies run deep. Anthropic Chief Executive Officer Dario Amodei actually worked at Google as an AI researcher earlier in his career. The two massive companies have maintained incredibly close ties ever since Amodei officially founded Anthropic with a small group of former OpenAI employees back in 2021. Just last year, Google announced it would provide up to 1 million of its highly valuable TPU chips directly to Anthropic in a massive deal worth tens of billions of dollars. By that point, the search giant had already pumped about $3 billion of investment cash into the young startup.
However, the relationship remains complicated. Even as Google pours billions of dollars into Anthropic, the two companies are still competing to be the first to create an artificial intelligence that can truly match human capabilities. They both desperately want to put their own branded tools into the hands of massive businesses across the entire economy. In recent months, according to current and former employees, Google’s top leaders have grown increasingly worried about their company’s weakening position in the massive market for AI coding, a sector currently dominated completely by Anthropic.
Despite the massive funding rounds, Anthropic still faces several severe risks. The company recently entered a brutal, highly public dispute with the US military over exactly how the armed forces could use Anthropic’s advanced technology. Following the fight, the Pentagon officially deemed the startup a severe supply-chain risk. The startup is currently fighting that dangerous government designation in federal court.
Financial experts are also raising red flags about the nature of these massive investments. Some analysts worry deeply about so-called circular deals occurring between major computing power providers and young AI startups like Anthropic and OpenAI. In these highly complex arrangements, the massive tech giants invest billions of dollars directly into startups, then turn around and sell their own expensive computer chips or data center capacity right back to those same startups, creating a massive, closed-loop financial system.
