🤖 Amazon's in with a chatbot

What’s going on here?

It took a while, but Amazon has finally found its very own ChatGPT lookalike.

What does this mean?

Microsoft kicked off the AI frenzy back in January when it acquired a $10 billion stake in ChatGPT creator OpenAI. And ever since, we’ve all been waiting to see how the other tech titans would respond. So far, we’ve had Alphabet’s Bard and Alibaba’s Ernie, of course, and on Monday, well, we got Amazon’s. The company announced it’s buying a $4 billion minority stake in Anthropic, creator of ChatGPT lookalike Claude 2. There are some seriously smart and creative people in artificial intelligence but, really, those names, people.

Why should I care?

For markets: A-W-Yes.

Microsoft told AI-hungry investors on its most recent earnings conference call that ChatGPT would boost revenue growth for Azure – the firm’s high-flying cloud services business – by around two percentage points. And that’s a not-too-shabby improvement on the 25% growth rate Azure is already seeing. The question now is whether Anthropic can do the same for AWS – Amazon’s even-bigger cloud wing – with a strategic partnership aimed at giving all those AWS customers access to its nifty AI tech. And with a stunning $100 billion or so of annual revenue coming from AWS, it would take only a tiny percentage in uplift to deliver a handsome return on Amazon’s $4 billion outlay.

Zooming out: Chipping away at Nvidia’s lead.

Nvidia makes the semiconductors that power AI, so its stock has been one of the unsurprising go-tos for anyone wanting in on the AI megatrend. But there’s some fine print in this Amazon deal that might interest Nvidia shareholders. As part of its tie-up with the Amazon, Anthropic will use chips designed by AWS to train all its AI models. And that’s one big, 800-pound gorilla of a competitor for Nvidia to try to outmaneuver.

What’s going on here?

Yet another potential US government shutdown looms, unless, that is, lawmakers can pass some sort of funding bill before the September 30th deadline.

What does this mean?

The non-essential parts of the US government could stop operating next weekend. And if you’d time-traveled here from some earlier point in history, you’d probably be fairly shocked at how blasé people and markets are to this fact. It used to be the threat of hundreds of thousands of federal workers being sent home without pay would rattle markets to their core. But, let’s face it, we’ve been here before, and a deal is likely to be struck either just before or just after that increasingly meaningless, fateful deadline. Congress has made this kind of end-of-the-world brinkmanship its brand, after all.

Why should I care?

For markets: Curtain-raiser for a bigger show.

So this week’s tussle will come and go, but there’ll be much more political wrangling and mudslinging in the months to come, ahead of the 2024 vote. And while experienced investors know to ignore shutdown spats, big election dramas can still put the whole market on edge.

The bigger picture: Debtie Downer.

The funding bill is about more than just debt levels, of course, but often the debate comes back to that whopping $30-odd trillion debt pile. As of August, 15% of federal spending was going to interest repayments alone. And with sky-high interest rates, and politicians struggling to agree on any book-balancing tactics, that percentage is only going one way.