Google Bets $40B on Anthropic: Is Google Cloud the New Growth Engine as Meta Challenges Ad Dominance?

TradingKey - According to Bloomberg, Google (GOOG) (GOOGL) will invest $10 billion in AI startup Anthropic, with a potential for an additional $30 billion in the future to strengthen their partnership.

Anthropic stated that Google has committed to an immediate $10 billion cash investment at a valuation of $350 billion, matching its valuation from the February funding round; if Anthropic meets performance targets, Google will invest an additional $30 billion.

Anthropic raised $30 billion in its February funding round, reaching a post-money valuation of $380 billion. Its current valuation has soared to $800 billion, with its secondary market valuation even exceeding $1 trillion.

Under the agreement, Google Cloud will provide Anthropic with 5 gigawatts of computing power over the next five years, starting to come online in 2027, with potential for further expansion. On April 6, Broadcom (AVGO) had announced two expanded collaboration agreements to develop and supply custom AI chips for Google, while providing additional computing power to Anthropic. The latest agreement represents a further expansion of the April 6 Broadcom deal.

Solving the Compute Crisis: Why Google TPU is the Strategic Choice for Anthropic’s Claude

Anthropic's need for Google's computing power stems from a compute shortage that has already begun to hinder its growth. Due to these constraints, its Claude service has recently suffered from persistent outages, rate limiting, and performance issues, even prompting some customers to switch to other AI platforms and creating business pressure for Anthropic.

According to reports on Monday, Anthropic has committed to Amazon over the next decade (AMZN) Web Services (AWS) to purchase more than $100 billion in computing resources and will utilize up to 5 gigawatts of Amazon AI chip capacity; Amazon is also investing an additional $5 billion in Anthropic, a move seen as a response to the compute crisis.

This latest procurement of computing power from Google further underscores the severity of Anthropic's compute shortage. Google's TPUs are among the most competitive rivals to Nvidia's (NVDA) chips and feature lower costs than Nvidia's, making them the ideal choice for Anthropic.

Google Counterbalances Microsoft-OpenAI Bloc with $40B Anthropic Strategy

For Google, why spend $40 billion to invest directly in its large model competitor Anthropic, when it already owns DeepMind, an AI-specialized subsidiary, the high-performing Gemini large model, and the world's largest TPU cluster?

On one hand, OpenAI, Google, and Anthropic have formed a tripartite rivalry in the large model space. This massive investment essentially brings Anthropic under Google's wing, hedging its bets on the future of large models: if Anthropic eventually emerges as the winner among the three, Google will still benefit.

Another competitor, OpenAI, has already formed an alliance with various tech giants, establishing a Microsoft (MSFT) -NVIDIA-Oracle (ORCL) -OpenAI symbiotic chain. However, Google struggles to compete on its own; its partnership with Anthropic aims to leverage external strength to dominate the large model sector.

In more specialized segments, Gemini’s developer share in the enterprise AI market has consistently lagged behind Claude, which remains superior in coding logic. The Claude Code agent, launched in 2025, is a command-line interface (CLI) tool designed specifically for programmers and is considered the highest-quality code generation tool currently available.

Furthermore, even setting aside the intense competition in large models, Anthropic becoming a TPU customer not only helps bolster its chip shipments but also provides a third-party endorsement for its hardware, thereby enhancing Google’s standing in the chip market.

Can Google Cloud Save the Bottom Line if Ad Revenue Peaks?

Currently, Google's core revenue source remains advertising, but its dominance is gradually eroding. The latest forecast from research firm eMarketer suggests that Meta (META) is poised to overtake Google in digital advertising revenue for the first time in 2026, becoming the world's largest digital advertising company. Meta's full-year net advertising revenue is projected to reach $243.46 billion, accounting for 26.8% of global advertising spend; Google is projected at $239.54 billion, or 26.4%. Although it is only a slight edge, it signifies that Google's status as the global advertising hegemon is slipping.

In recent years, Google has been betting heavily on its cloud services as a second growth engine. By the end of 2025, Google Cloud's market share in the global cloud infrastructure services market had risen to 14%, trailing Amazon AWS's 28% and Microsoft Azure's 21%. Despite being the fastest-growing player—with Q4 2025 revenue increasing by a staggering 48% year-over-year, far outstripping its competitors—its original base is smaller, and it will still take time to catch up to AWS and Azure.

Given the expectation that advertising revenue could be surpassed at any time, Google Cloud urgently needs a customer like Anthropic, whose massive and stable demand can bolster its revenue.