Betting on Anthropic's great success, Google and Amazon gain over 10 billion in paper profits

Alphabet and Amazon's bets on AI startup Anthropic are translating into huge paper gains, with both tech giants' third-quarter earnings boosted by billions of dollars from this investment.

On November 1st, according to media reports, insiders revealed that Alphabet's third-quarter profit included a net gain of $10.7 billion from equity securities, partly from the private company Anthropic. Amazon's third-quarter profit surged 38%, with its investment in Anthropic contributing $9.5 billion in pre-tax earnings. This gain is reflected in Amazon's non-operating income for the quarter.

This marks the beginning of the investment boom in generative AI private companies showing up in the financial metrics of publicly traded companies. Shares of AI startups, once seen as strategic bets in a rapidly growing field, are now contributing substantial paper profits to the world's largest enterprises, even though these technologies are just starting to generate commercial returns.

Anthropic's Valuation Surge Drives Paper Gains

Reports indicate that Google has invested approximately $3 billion in Anthropic, including $2 billion in 2023 and $1 billion earlier this year. This month, Google Cloud reached an agreement with the startup to supply 1 million dedicated AI chips starting in 2026, providing over 1 gigawatt of computing power in a relatively short time. The contract is worth hundreds of billions of dollars.

Notably, this is not the first time Alphabet's profits have increased due to changes in investment value. In April of this year, the company stated that its first-quarter earnings were boosted by $8 billion in unrealized gains from an investment in a private company. According to media reports, the investment target at that time was Elon Musk's SpaceX.

Amazon is supporting Anthropic with an $8 billion investment and has built a massive data center network and custom AI chips for the startup under a system called Project Rainier. Amazon stated this week that the infrastructure is now operational.

In the latest funding round completed in September, Anthropic's valuation skyrocketed from previous levels to $183 billion, nearly tripling. According to accounting standards, investors need to update the investment value based on market price changes, even if they have not yet received cash returns from the investment.

The investment boom in generative AI private companies is shifting from strategic positioning to quantifiable financial returns. Although the commercialization of AI products like the Claude chatbot is still in its early stages, with Anthropic's soaring valuation, its investors have begun to reflect significant gains in their financial reports.

Analysts point out that this investment revaluation mechanism allows tech giants to immediately reflect paper gains when the valuations of AI startups rise, providing significant support for quarterly performance.

In contrast, Microsoft disclosed in its financial report this week that net income decreased by $3.1 billion due to losses from its investment in OpenAI. The software giant has invested $13.75 billion in the ChatGPT maker, holding a 27% stake