Betting on Anthropic paid off, with Google and Amazon gaining billions in book profits.

Alphabet and Amazon’s bets on AI startup Anthropic are turning into massive book gains, with the two tech giants reporting billions of dollars in profit boosts in their third-quarter financial reports due to this investment. On November 1, media reports cited insiders saying that Alphabet’s third-quarter profit included $10.7 billion in net gains from equity securities, partly contributed by private company Anthropic. Amazon’s third-quarter profits surged 38%, with its investment in Anthropic contributing $9.5 billion in pre-tax gains. This income appeared in Amazon’s non-operating revenue for the quarter. This marks the beginning of the generative AI private company investment boom showing up in the financial metrics of listed companies. Once seen as strategic bets in a fast-growing field, shares in AI startups are now delivering substantial book profits for the world’s largest companies, even though these technologies are only just starting to generate commercial returns. Anthropic’s Soaring Valuation Drives Book Gains The report stated that Google has invested about $3 billion in Anthropic, including $2 billion in 2023 and another $1 billion earlier this year. This month, Google Cloud reached an agreement with the startup to supply 1 million dedicated AI chips from 2026 onward, providing over 1 gigawatt of computing power in a relatively short period. The contract is valued in the tens of billions of dollars. Notably, this is not the first time Alphabet’s profits have been boosted by changes in investment value. In April this year, the company said its first-quarter profit saw $8 billion in unrealized gains from an investment in a private company. According to media reports, that investment target was SpaceX, Elon Musk’s space exploration company. Amazon is supporting Anthropic with an $8 billion investment and has built a vast data center network and custom AI chips for the startup under the Project Rainier system. Amazon said this week that the infrastructure is now up and running. In Anthropic’s latest financing round completed in September, its valuation surged to $183 billion, nearly tripling from its previous level. According to accounting standards, investors must update the value of their holdings based on changes in market price, even if they haven’t directly realized a cash return from the investment. The investment boom in generative AI private companies is shifting from strategic planning to quantifiable financial returns. While the commercialization of AI products such as the Claude chatbot is still at an early stage, Anthropic’s soaring valuation has already enabled its investors to reflect significant gains in their financial reports. Analysts pointed out that this mechanism for reassessing investments allows tech giants to immediately recognize book gains as AI startup valuations rise, providing a clear boost to quarterly results. By contrast, Microsoft disclosed in its earnings report this week that its net income fell by $3.1 billion due to losses from its OpenAI investment. The software giant has invested $13.75 billion in OpenAI, maker of ChatGPT, and holds a 27% stake. Risk Disclosure and Disclaimer The market carries risks and investments require caution. This article does not constitute individual investment advice and does not take into account individual users’ particular investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their unique circumstances. Investing based on this information is at your own risk.