Alphabet, Amazon Stakes In Anthropic Boost Profit By Billions

Alphabet Inc. and Amazon.com Inc. were rewarded by investors for reporting better-than-expected third-quarter profits. At both companies, earnings were boosted by the increased value of their stakes in Anthropic PBC, maker of the popular Claude chatbot. Alphabet said profit included "net gains on equity securities of $10.7 billion," in part from a private company. That company is Anthropic, according to people familiar with the matter, who declined to be named disclosing non-public information. Meanwhile, Amazon’s third-quarter profit climbed 38%, helped by a $9.5 billion pretax gain from its investment in Anthropic. The higher value was reflected in Amazon’s nonoperating income for the period, the company said in its Thursday earnings report. The surge of investment in private-company generative AI is beginning to show up in public-company metrics. Once seen mainly as strategic bets on a fast-moving frontier, stakes in AI startups are now contributing sizable, if still paper, profits to some of the world’s biggest businesses — even as the technology itself is only starting to pay commercial dividends. Spokespeople for Alphabet and Anthropic declined to comment. In September, Anthropic closed a deal to raise $13 billion from investors in a funding round that nearly tripled its valuation to $183 billion. Companies are required to update the value of their investments to reflect changes in market price per share, even if they haven’t made money off their bet directly yet. This isn’t the first time Alphabet’s profit has been lifted by changes in investment values. In April, the company said its first-quarter earnings were boosted by $8 billion in unrealised gains from an investment in a private company. That time, it was Elon Musk’s Space Exploration Technologies Corp., Bloomberg reported. Microsoft Corp., meanwhile, said in reporting its own quarterly earnings this week that its net income was reduced by $3.1 billion to account for losses suffered by OpenAI. The software company has backed the ChatGPT maker with $13.75 billion, and holds a 27% stake. Alphabet’s Google has already invested roughly $3 billion in Anthropic, including $2 billion in 2023 and another $1 billion earlier this year. This month, Google Cloud struck a deal to supply the startup with 1 million of its specialized AI chips starting in 2026, bringing more than a gigawatt of computing capacity online relatively soon. The contract is worth tens of billions of dollars, Bloomberg reported. Amazon is backing Anthropic with an $8 billion investment and has built the startup a massive network of data centers and custom AI chips under a system known as Project Rainier. That infrastructure is now up and running, Amazon said this week.