Amazon is doubling value of credits for some startups to build on AWS as Microsoft cloud gains ground

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Attendees walk through an expo hall at AWS re:Invent, a conference hosted by Amazon Web Services, at the Venetian in Las Vegas on Nov. 28, 2023.
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Amazon will double the value of credits it offers some startups to use its cloud infrastructure, CNBC has learned, as the company faces heightened competition from Microsoft in artificial intelligence services.

Starting July 1, startups that have raised a Series A round of funding in the past year will be eligible for $200,000 in credits through AWS’ Activate program, up from $100,000 before, the Amazon cloud unit said in an email to venture capitalists this week. Seed-stage startups will still be eligible for $100,000 in credits, AWS said.

Two people briefed on the changes confirmed the credit increase, though they asked not to be named because the information is private.

Matt Garman, who was recently promoted to CEO of AWS after running sales and marketing, was meeting with founders in Silicon Valley this week, the people said. Garman told the execs that collaborating with startups would always be a primary focus, one of the people said, adding that Garman described AI companies as AWS’ ideal customers.

An AWS spokesperson confirmed the increase in credits and Garman’s visit to Silicon Valley. The spokesperson added that in the past, the $100,000 would expire in one year, while the $200,000 credit will now expire in three years.

Amazon, which is best known for its massive online retail operation, derives most of its profit from AWS, a business it launched in 2006, well before rivals Microsoft and Google hit the scene. AWS leads the market, with $25 billion in revenue in the first quarter, up 17% from a year earlier.

But Microsoft Azure and Google Cloud are growing more quickly, and are benefiting from rapidly advancing AI models. Backed by Microsoft, OpenAI launched ChatGPT in late 2022 on Azure, and has since attracted a wave of AI workloads to Microsoft from companies big and small. Google has a number of large language models, most notably Gemini.

Amazon has been trying to catch up in generative AI and has poured billions of dollars into OpenAI challenger Anthropic.

Last month, AWS CEO Adam Selipsky announced his resignation after three years running the business, with Garman named as his successor. During Selipsky’s time at the helm, Microsoft and Google increased their share of the cloud infrastructure market. One analyst told CNBC that Microsoft “ran laps around” AWS in generative AI.

Startups have long been fertile ground for cloud infrastructure companies, as they try and lure ambitious founders who could be building the next multibillion-dollar business.

In November, Microsoft announced a partnership with Silicon Valley accelerator Y Combinator that would provide participating startups with $350,000 in Azure credits and access to graphics processing units (GPUs) for training AI models, a spokesperson said. Microsoft has since extended the $350,000 credit incentive to other accelerators, including the AI Grant.

Startups enrolled in Microsoft’s Founders Hub program, which doesn’t require previous venture funding, can receive up to $150,000 in Azure credits over four years.

In addition to its Activate offering, Amazon has a new 10-week generative AI accelerator program. Participants will be able to access up to $1 million in cloud credits, according to the website.

Earlier on Friday, Amazon’s head scientist, Rohit Prasad, told employees that the company has hired David Luan, co-founder and CEO of AI startup Adept, along with some of Luan’s colleagues. “Amazon is also licensing Adept’s agent technology, family of state-of-the-art multimodal models, and a few datasets,” Adept said in a blog post.

WATCH: AWS will boost investments in Singapore’s cloud infrastructure by $9 billion

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