Anthropic Just Became AI's Hottest Ticket-Backed by Microsoft and NVIDIA

Before NVIDIA Corp. (NASDAQ: NVDA) reported earnings on Nov. 19, the company got some bullish news. Anthropic, the host of the Claude AI large language model (LLM), announced it would commit $30 billion to use Microsoft’s (NASDAQ: MSFT) Azure cloud services.

Here’s a quick breakdown of what each company gets out of the deal:

• Anthropic will spend $30 billion on Microsoft Azure, securing up to one gigawatt of compute capacity.
• NVIDIA plans to invest as much as $10 billion in Anthropic.
• Microsoft is committing up to $5 billion in new funding to support Anthropic’s growth.

The only questionable aspect of this deal may be its timing. 

Almost immediately, some analysts criticized it as yet another example of the “circular” investment patterns emerging in the artificial intelligence (AI) buildout.

Still, the strategic benefits for each party are clear:

• Anthropic strengthens its computing and distribution capabilities, boosts its valuation, and deepens ties with both Microsoft and NVIDIA.
• NVIDIA secures long-term demand for its AI chips through direct commitments from both Anthropic and Microsoft Azure.
• Microsoft expands its AI ecosystem beyond OpenAI, reinforcing its Copilot and enterprise AI product suite in the process.

Bears See Concerns Over the AI Bubble Getting Overinflated

The three-way deal is only the latest example of the circular AI economy, of which NVIDIA seems to be the only constant. However, bears would argue that deals such as this will expand already elevated expectations.

But committing to spend money and actually spending it are very different. Right now, demand outweighs supply by a large margin. However, if that were to change, the air could come out of that bubble quickly. In that scenario, technology stocks like Microsoft and NVIDIA could face disproportionate risks.

Now factor in that both stocks are considered overvalued, and it’s not hard to understand why these related-party transactions may carry more risk than reward.

The Counterpoint: This Is a Race to the Winner’s Circle

Anytime you see memes being made of something, there’s something humorous about it. That’s the case with the circular AI trade. Investors shouldn’t dismiss it, but they should put it into context.

This isn’t a zero-sum game, but there will be winners and losers. Megacap companies like Microsoft and Meta Platforms (NASDAQ: META) are making these deals in an effort to create mutually reinforcing demand for each other’s products. That ensures that these companies will have a larger share of an AI market that is only expanding in size.

Right now, there are many players in the AI space. That’s likely to change. The deal between Anthropic, NVIDIA, Microsoft, and other deals like it is like a game of musical chairs. It’s not that the funding will dry up, but the need for additional funding and additional players will slow down.

That means the smaller, less diversified, or highly speculative AI companies face risks around capital access, customer concentration, and execution. That could leave them without a chair in this high-stakes game.

What This Means for Investors

These circular AI deals reflect a strategic land grab rather than a speculative frenzy. Yes, the numbers are staggering, and yes, valuations for companies like Microsoft and NVIDIA remain stretched. But these firms are not simply recycling capital to prop up narratives. They’re securing long-duration demand, locking in preferred partnerships, and reinforcing their competitive moats at a time when AI capacity remains scarce.

Over the next several years, companies with the deepest pockets and broadest ecosystems will shape the AI infrastructure layer. Anthropic’s deal is another sign that the industry is consolidating around a handful of winners, and those winners are racing to capture the economic upside before the music slows.

For investors, that means the opportunity isn’t necessarily in every AI stock. It’s in the platforms with the scale, capital, and customer reach to dictate the rules of the game.

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The article "Anthropic Just Became AI’s Hottest Ticket—Backed by Microsoft and NVIDIA" first appeared on MarketBeat.