A start-up artificial intelligence company is making headlines today after announcing deals with two of the world’s largest tech companies. Anthropic is securing US$5 billion from Microsoft (NASDAQ: MSFT), while leading chipmaker Nvidia (NASDAQ: NVDA) is investing US$10 billion in the latest deals to fuel AI’s rapid expansion.
Both companies have high hopes that the deals with Anthropic, an AI research company valued at over US$180 billion, will strengthen their market-leading positions. But which stock is the better buy following these transactions?
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About the deals
The partnerships among the three companies were announced in a blog post on Nov. 18. In short, Anthropic will scale up its Claude AI model on Microsoft’s cloud computing platform, Azure, and it will use Nvidia’s Blackwell and Rubin semiconductors to provide the compute power.
It’s the first partnership between Anthropic and Nvidia, the world’s leading producer of data centre graphics processing units (GPUs) required for training and running high-performance AI programs. The companies said that Nvidia and Anthropic will collaborate on design and engineering to optimize Anthropic’s AI models.
Anthropic’s deal with Microsoft will make the AI company’s Claude large language model (LLM) available to Microsoft Foundry customers, and will make Cloud the only frontier LLM available on the three leading cloud services – Microsoft Azure, Amazon (NASDAQ: AMZN) Web Services, and Alphabet‘s (NASDAQ: GOOG) Google Cloud.
Anthropic is committed to purchasing US$30 billion in Azure compute capacity and will have a contract for additional compute capacity of up to 1 gigawatt.
Which stock is better after the Anthropic deal?
While both benefit, I think there’s a clear winner here. However, first, it’s essential to examine some background information.
Microsoft was one of the early investors in OpenAI, the creator of ChatGPT, but the nature of that relationship is evolving. Last month, OpenAI announced it struck a deal with Microsoft that allows the company to restructure and frees it from giving Microsoft rights over OpenAI’s work in exchange for cloud computing services. Microsoft still has a 27% stake in OpenAI, but the private company will now have greater control over its business operations.
Anthropic was founded by a former OpenAI executive and emphasizes AI safety, transparency, and research, in contrast to OpenAI’s focus on general advancement and accessibility.
Make no mistake — OpenAI and Anthropic will be competitors for a long time. Microsoft is working with both of them and hopes both will continue to grow. However, if Anthropic begins cutting too severely into ChatGPT’s market share, Microsoft’s US$135 billion investment in OpenAI could be at risk.
Nvidia, however, has no such conflicts. OpenAI and Anthropic both rely heavily on its GPUs, and as both companies expand their products, they will need more computing power and more support from Nvidia.
I like both Microsoft and Nvidia. But if you’re picking a winner in today’s news, my money’s on Nvidia stock.
