UK regulators have approved Amazon’s partnership with AI startup Anthropic, stating that the deal does not require further investigation under merger law, despite ongoing scrutiny in the U.S. Anthropic is projected to achieve significant revenue growth, primarily through Amazon’s AWS, although it still faces profitability challenges compared to larger competitors like OpenAI.
UK regulators have approved Amazon’s partnership with AI startup Anthropic, indicating that the deal does not warrant an investigation under UK merger law. This decision comes despite ongoing regulatory scrutiny in the U.S., where the Federal Trade Commission (FTC) is investigating not only Amazon’s collaboration with Anthropic but also similar deals involving Google and Microsoft. The UK regulators noted that Anthropic does not meet the necessary market share thresholds for further investigation, highlighting the relatively small revenue figures in the current generative AI landscape.
Anthropic is projecting $1 billion in sales for the year, a significant increase that reflects a growth rate of over 1,000% year-over-year. A substantial portion of this revenue—up to 75%—is expected to come from Amazon’s AWS through third-party APIs. This partnership is seen as a strategic move for Amazon, as it strengthens Anthropic’s market position while simultaneously driving significant revenue growth through its cloud services.
Despite the impressive growth projections, the revenue figures for Anthropic are still modest compared to industry giants like OpenAI, which is expected to generate $3.4 billion in revenue. The current valuation of AI startups is high, but many are still grappling with profitability challenges. Startups like Anthropic and OpenAI face substantial costs associated with developing foundational AI models, which can lead to lower gross margins.
Recent data from fintech company Stripe indicates that AI startups are achieving revenue milestones faster than traditional software companies. In 2024, it takes just two years for the top 100 AI companies to reach $5 million in annualized revenue, compared to three years for software companies in 2018. This rapid growth in revenue generation is notable, but it does not necessarily translate to immediate profitability, as many AI companies still face significant financial hurdles.
The ongoing antitrust investigations by the FTC and DOJ are impacting the tech sector, with 43% of the S&P 500 market capitalization currently under scrutiny. This regulatory environment may deter some companies from pursuing new deals, as the fear of antitrust repercussions looms large. As the landscape for AI companies continues to evolve, the balance between growth, revenue, and regulatory compliance will be crucial for their long-term success.