An exclusive report from The Information reveals a rare, strategic misstep for Amazon Web Services (AWS) that opened the door for Microsoft to become a forerunner in AI technology. This development has far-reaching implications for the industry as a whole, with AWS previously holding a near-monopolistic influence over cloud infrastructure.
According to exclusive interviews, AWS originally planned to unveil its own large language model (LLM) akin to ChatGPT at its annual conference in November 2022. But technical issues forced AWS to postpone the launch of its LLM, codenamed Bedrock.
This decision turned out to be fortunate, as OpenAI released ChatGPT just a few days into AWS's annual conference. ChatGPT wowed the tech industry with its human-like conversational abilities, instantly revealing that AWS's Bedrock wasn't on the same level. The sudden success of ChatGPT, built by OpenAI using Microsoft's cloud, made AWS scramble to catch up.
After realizing their product's limitations, AWS made a quick pivot. They rebranded Bedrock as a new service that allows developers to connect cloud applications with a variety of LLMs. However, Microsoft had already seized the opportunity by forming a close relationship with OpenAI, AWS’s direct competition in this space.
N.B. In a statement, Patrick Neighorn, a spokesperson for AWS, disputed The Information’s reporting. He said it “does not accurately describe how we landed on features, positioning, and naming for Amazon Bedrock and Amazon Titan.” He added: “By design, we wait until the last opportunity to finalize the precise set of launch features and naming. These are high-judgment decisions, and we want to have as much data and feedback as possible.”
The company's missteps underscore how AWS failed to seize its early advantage in AI, clearing the path for Microsoft's alliance with AI startup OpenAI to take off. AWS was initially a pioneer in the AI space. In fact, back in 2015, it was one of the first investors when OpenAI formed as a nonprofit research group. In 2017, AWS released SageMaker, enabling companies like General Electric and Intuit to build their own machine learning models.
Yet, in 2018, when OpenAI approached AWS about an ambitious partnership proposal, they turned them down. OpenAI wanted hundreds of millions in free AWS computing resources without granting AWS any equity stake in return.
AWS also passed on opportunities to invest in two other leading AI research labs, Cohere and Anthropic, when they sought similar partnerships in 2021. Both startups hoped AWS would provide cloud resources and make equity investments to integrate their models into Amazon products. Later, realizing its mistake, AWS tried to invest in Cohere, but was rejected.
By turning down these opportunities, AWS missed crucial chances to ally with cutting-edge startups shaping the future of generative AI. It spurned alliances that could have kept AWS on the frontier of artificial intelligence.
Meanwhile, Microsoft forged a tight alliance with OpenAI, committing $1 billion in 2019 to power OpenAI's models with its Azure cloud platform. This strategic partnership has given Microsoft an advantage in being the exclusive provider of currently the most capable AI model available.
AWS’s early dominance in AI is quickly melting away as it rejected bold ideas from OpenAI and other startups. Microsoft has opportunistically swooped in, and locked up key partnerships AWS could have secured.
Now Microsoft possesses valuable momentum in selling AI services to eager enterprises looking to leverage game-changing technologies. Long-standing AWS customers like Intuit have reportedly increased spending on Microsoft Azure cloud services from "just a few thousand dollars a month to several million dollars a month".
Despite owning the lion's share of the cloud infrastructure market (accounting for 40% of global spending), AWS has trailed competitors in developing cutting-edge AI capabilities. As Microsoft gains traction with OpenAI and Google makes advances, AWS faces mounting pressure to catch up and provide innovative AI offerings to maintain its cloud dominance.
AWS is now rushing to patch gaps in its AI lineup, forging alliances with AI startups and unveiling offerings like Bedrock and Titan. But according to insiders, these new tools have yet to achieve the consistent quality of chatbot responses already provided by competitors. While Bedrock remains in limited release, Titan is reportedly still not measuring up to models developed by other companies, even in its current form.
Despite the setbacks and the lost opportunities for partnership with AI startups, AWS is far from out of the race. It's still early days, and the company certainly has the resources, relationships and experience to regain dominance. AWS insists that there is still plenty of room for growth and competition within the AI cloud service market. However, to remain relevant, it will need to bolster its AI offerings to meet the rapidly evolving standards set by competitors like Microsoft and OpenAI.