Amazon's $8 billion Anthropic investment balloons to $61 billion

Core Viewpoint - Amazon's investment in Anthropic has significantly increased in value, indicating a potentially lucrative strategic technology investment for the company [1][2]. Investment Details - Amazon holds $45.8 billion in convertible notes and $14.8 billion in nonvoting preferred stock in Anthropic, totaling a stake worth $60.6 billion [1][8]. - The company has invested $8 billion in Anthropic since late 2023, resulting in a seven-fold increase in value [2]. - Anthropic's recent funding rounds have raised its valuation from $61.5 billion in March to $183 billion in September, with discussions for a new round potentially pushing it to $350 billion [3]. Financial Impact - Amazon's convertible notes convert to preferred stock as Anthropic raises additional capital, allowing Amazon to gain valuable stock with each funding round [7]. - In 2025, conversions generated approximately $5.6 billion in recognized gains for Amazon, with an additional $7.2 billion upward adjustment to "other income" in Q3 due to Anthropic's valuation increase [7]. - The value of Amazon's Anthropic stake rose from $38.5 billion in Q3 to $60.6 billion in Q4, with expectations of a further $15 billion gain in Q1 as some notes convert to nonvoting preferred stock [8]. Valuation Methodology - Amazon's valuations of its Anthropic stake are based on "significant judgment" and classified as "Level 3" assets, relying on unobservable inputs rather than market prices [9]. - This classification is typical for startup investments, which lack regularly traded securities on liquid public markets [9].