Amazon Uses AI Race to Boost its Cloud Clout

For once Amazon might be feeling just the teensiest bit insecure.

In a bid to attract some new clients for its cloud service, Amazon’s cloud computing division AWS told Reuters on Tuesday that it is boosting its free credit program for startups. In addition to covering cloud computing costs, the program will also foot the bill for using large AI models made by other companies, including Meta, Mistral AI, and Cohere — but notably not the Microsoft-backed OpenAI. It’s just the latest tell that the AI arms race runs hand-in-hand with Big Tech’s fight for cloud dominance.

Cloud Burst

AWS has been Amazon’s profit whale for years, and it currently has the market share edge over Microsoft’s cloud business, Microsoft Azure. That status quo could be in danger of tipping. In February, CNBC reported that Azure is growing much faster than AWS, with analysts largely pointing to Microsoft’s AI offerings — not only is the company heavily invested in OpenAI, it has also integrated AI tech into Azure and kitted out its data centers with heavy-duty GPUs capable of handling the large amounts of computing power needed to run AI models.

Last week Amazon invested $2.75 billion in AI startup Anthropic following a $1.25 billion investment in September, so both Amazon and Microsoft have picked their respective horses for AI software — albeit Microsoft had a considerable head start. Through its free credit announcement, Amazon is going for some fairly old-school vertical integration:

• The free credits are being offered through a platform called Amazon Bedrock, which farms out large AI models to whoever wants to use them.
• Howard Wright, vice president and global head of startups at AWS, told Reuters that the new credits would drive revenue towards Anthropic, adding: “That’s part of the ecosystem building. We are unapologetic about that.”

“This is part of the strategy of the major cloud hyperscalers as part of their AI land grab efforts,” Sid Nag, vice president for cloud services and technologies at Gartner Research, told The Daily Upside. 

Start ‘Em Up: Nag added that startups are prime candidates for AWS to get a bigger toehold further down the line. “Even if 10 percent of these startups become major technology players (kind of like the venture capital business model) in the future using the Hyperscalers/AWS’s AI offerings including a variety of LLM [large language model] providers including Anthropic — it has the potential for being big business for these cloud hyperscalers like Amazon/AWS,” Nag said. He noted that Google had adopted a similar strategy reeling startups into its cloud business (a distant third to AWS and Azure in terms of market share) long before the generative AI hype train left the station.