Amazon (AMZN) is set to unveil a revamped version of Alexa in October, just in time for the U.S. holiday season. However, instead of relying on its own artificial intelligence (AI) technology, the tech giant has chosen to power this new Alexa primarily with Anthropic’s Claude AI models, according to an exclusive Reuters report.
This new “Remarkable” version of Alexa will use advanced generative AI to handle more complex queries, which will be a significant upgrade from the current capabilities. Furthermore, Amazon plans to charge between $5 and $10 per month for this new version of Alexa while still offering the “Classic” Alexa for free.
The new Alexa is expected to be previewed at Amazon’s annual devices and services event in September, ahead of its October release. Internally known as “Remarkable Alexa,” this upgrade is seen as crucial for Amazon, especially since the Alexa business has struggled to generate significant revenue. Amazon has stated that it has sold 500 million Alexa-enabled devices but has not disclosed its active users so far.
Why Has AMZN Turned to Anthropic?
The company’s earlier efforts to develop a new version using Amazon’s in-house AI faced significant challenges, including delays of six to seven seconds in responding to user prompts. Frustrated with these shortcomings, Amazon turned to Claude, an AI chatbot developed by the startup Anthropic, which outperformed Amazon’s own models.
Last year, Amazon announced a $4 billion investment in Anthropic, stating that its customers would gain early access to the startup’s technology. While it is not clear whether Amazon will incur additional costs for integrating Claude into Alexa, this collaboration indicates that AMZN is looking to enhance its AI capabilities. Notably, Alphabet’s Google (GOOGL) has also invested $2 billion into Anthropic.
Is Amazon a Buy, Hold, or Sell?
Analysts remain bullish about AMZN stock, with a Strong Buy consensus rating based on 41 Buys and one Hold. Over the past year, Amazon has increased by more than 25%, and the average AMZN price target of $222.18 implies an upside potential of 26.8% from current levels.
