Latest / Elon Musk Podcast / Why Google Funds Anthropic with massive $40 billion investment

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Why Google Funds Anthropic with massive $40 billion investment · Elon Musk Podcast

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  Google just handed over up to $40 billion and enough
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  electricity to power millions of homes to Anthropic, an AI
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  company whose flagship product is actively outselling Google's
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  own artificial intelligence in the enterprise market.
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  Yeah, the size of that capital commitment is just staggering.
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  I mean, we're looking at a completely new hardware arms
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  race, a huge energy infrastructure build out, and a
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  really bitter legal conflict over military AI.
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  So how does a single startup compel the world's biggest tech
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  giants to hand over their checkbooks while, you know,
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  simultaneously fighting the Pentagon in federal court?
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  Right. So we have to look at the
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  structure of this Google deal. It's incredibly specific.
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  It's $10 billion upfront at a $350 billion evaluation.
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  Wow. Yeah.
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  And then there's another $30 billion that is contingent on
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  strict performance targets. Plus, Amazon is simultaneously
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  pouring in up to $25 billion of their own.
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  Which is just a crazy amount of money.
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  Like why is this? Happening well, it comes down to
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  commercial adoption. Anthropics annual revenue run
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  rate surged from $9 billion to $30 billion.
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  And the main engine driving that is clawed code.
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  It's an AI software development agent that reached a $2.5
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  billion run rate on its own, and you know, the majority of
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  Fortune 100 companies are using it right now.
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  Wait, Becca, this sounds like a major airline buying a massive
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  fleet of jets for a rival airline.
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  Why is Google funding a direct competitor?
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  I mean, that airline analogy is spot on.
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  It's exactly like buying them The Jets, but with a strict
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  contract that says they have to buy all their jet fuel from you
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  and they can only park those jets at your gates.
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  Oh, I see. So the consequence is this
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  circular economy. Anthropic gets billions of
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  dollars, but they are forced to spend heavily on Google Cloud
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  and Amazon Web Services. Right to run their models.
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  Exactly, it changes the power dynamic because those hyper
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  scalers are using their capital to lock in Anthropic as a
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  guaranteed mega customer for their own infrastructure.
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  So they are paying their rival to rent their own equipment.
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  Basically, yeah. And that equipment brings us to
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  the hardware at the center of the Google deal.
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  Yeah, they're getting access to the 7th generation Ironwood
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  Tensor Processing Unit, or DPU. The specs are wild.
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  A single chip delivers 4.6 petaflop PS of performance and
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  has 192 gigabytes of memory, which effectively matches
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  Nvidia's top tier Blackwell chip.
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  Yeah, but how Google connects these chips is completely
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  different than NVIDIA. Right.
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  Because NVIDIA Cluster 72 chips in Iraq using standard packet
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  switches, but Google uses optical circuit switches and a
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  3D Taurus mesh topology which lets them link over 9000 ships
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  into a single unified pod. It's amazing physical
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  engineering. They use these tiny mirrors to
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  beam light directly from chip to chip.
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  Hold on though, if NVIDIA is the unquestioned gold standard for
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  AI hardware, why is Anthropic risking their models on Google's
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  custom chips? Well, it really comes down to
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  total cost of ownership. For inference, which is the
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  daily process of answering user queries, Tpus are 30 to 44%
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  cheaper for specific task of inference.
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  Wow, that's a big drop. It is, and it opens up a split
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  in chip design. So Google is creating 2 separate
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  chips moving forward, one for training called Sunfish and one
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  just for inference called Zebrafish.
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  You know, from an economic standpoint, I'd argue raw
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  hardware cost savings will win out over everything else.
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  The cheapest purpose built silicon is just going to
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  dominate I. Hear that?
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  But NVIDIA software ecosystem creates an enormous barrier to
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  entry. I mean, developers globally rely
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  on NVIDIA specific programming languages.
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  That's true. So even if Google's hardware is
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  cheaper to run, forcing engineers to learn an entirely
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  new ecosystem is a huge friction point.
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  Even so, the physical infrastructure requirement is
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  huge, regardless of the ecosystem.
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  The Google deal includes 5 gigawatts of power for
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  Anthropic. Yeah, that's.
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  A lot. Just for perspective for
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  everyone listening, one GW can power 3/4 of a million homes.
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  So we're talking about powering several major cities.
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  And over 200 environmental groups are currently demanding A
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  halt to new data centers. Which is exactly why Anthropic
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  is building a $5 billion Texas mega campus.
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  They deliberately located it near natural gas pipelines to
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  bypass the main electrical grid. Oh wow.
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  Yeah, they're aiming for over 7 gigawatts of capacity.
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  It seems contradictory for an AI company that claims to be
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  building a better future for humanity to, you know, fire up
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  huge natural gas pipelines just to run their servers.
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  I get that, but the consequence of all this is Anthropic's four
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  pillar energy plan, led by a new executive they hired from
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  Google. OK, what is that?
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  They're committed to pay for all grid upgrades, actively build
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  new power generation, and reduce usage during peak grid stress.
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  It basically changes data centers from passive grid
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  consumers into active energy producers.
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  Basically they have to build their own power plants just to
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  keep the AI awake. That's exactly it.
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  Which honestly leads into the geopolitical conflict here.
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  The Department of Defense demanded unrestricted access to
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  Anthropics AI for any lawful purpose.
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  And Anthropic refused. Right, They mean obtained 2 firm
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  lines, no mass surveillance of Americans and no lethal
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  autonomous weapons without human oversight.
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  And the fallout was severe. The Secretary of Defense
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  designated anthropic the supply chain risk, which is a label
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  usually reserved for foreign adversaries.
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  That's intense. Yeah, a presidential directive
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  banned them from federal systems, and the government
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  cancelled a $200 million contract.
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  Wait, can the government ban an American company simply because
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  the company refuses to change its terms of service?
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  Well, it sparked a massive legal battle.
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  A federal judge blocked the Pentagon's ban, calling it
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  illegal First Amendment retaliation.
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  OK, But then an appeals court denied a motion to stop the
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  security risk label in a parallel case.
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  This limits the government's ability to force ethical
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  concessions, but it opens up a huge legal war over who actually
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  controls the boundaries of AI warfare.
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  I mean, looking at it structurally, national security
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  imperatives usually override corporate terms of service.
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  You just can't have a weapon system suddenly refused to
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  operate because of a commercial update.
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  True, but a private company has the legal right to refuse lethal
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  use of its product. They have the right to dictate
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  how their tech is used. Oh, and meanwhile, Open AI has
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  stepped in to take the military contracts that Anthropic refuse.
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  So the single startup is currently reshaping the
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  semiconductor market, financing its own massive power grids and
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  battling the military over the ethical limits of warfare.
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  When a single private company commands the computing power of
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  a small nation and can dictate terms to both both the
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  hyperscalers and the Pentagon, who is actually regulating the
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  future of artificial intelligence?
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