Did Amazon Just Declare Checkmate Against OpenAI?

Amazon has made waves with its recent update to the Claude large language model, highlighting its serious intent to compete with OpenAI.

On November 30, 2022, the landscape of artificial intelligence shifted dramatically when an emerging start-up named OpenAI unveiled ChatGPT. This model impressed the world with its ability to engage in conversation, write code, generate images, and much more, all utilizing generative AI technology.

In the wake of this, major technology firms started investing heavily in alternative AI models to challenge OpenAI's dominance. Among these giants is Amazon (AMZN 2.24%), which formed a partnership with Anthropic and has invested around $8 billion in the start-up over the last two years. While OpenAI has established a first-mover advantage, Amazon's latest update alongside Anthropic indicates the competitive landscape is heating up.

The question arises: Did Amazon just say checkmate to OpenAI? Let's examine the details.

Amazon's New Developments

ChatGPT and its counterparts, including Amazon's Claude, are categorized as large language models (LLMs). They are user-friendly, allowing people to simply type questions into a browser and receive comprehensive answers within seconds.

Amazon has recently taken this concept further by introducing a hybrid reasoning model, which comes in two modes: standard and extended thinking.

In the standard mode, users can pose questions to Claude and receive detailed or simplified responses according to their preference. In contrast, the extended thinking mode allows the model to utilize reasoning applications to lay out a "chain of thought," explaining its reasoning process before arriving at an answer.

This step-by-step approach not only delivers results but also helps users understand Claude's reasoning. Users can refine their inquiries or explore deeper into specific aspects of the model's responses by asking follow-up questions.

Is This a Move Towards Checkmate?

At first glance, it may appear that OpenAI fell behind, granting the competition an opportunity to advance. Nevertheless, most mainstream LLMs offer similar features alongside unique applications, creating a space for various models.

While Amazon might have beaten OpenAI in launching an official hybrid reasoning model, it doesn’t necessarily mean the end of ChatGPT’s relevance. In February, OpenAI's CEO Sam Altman acknowledged on X (formerly Twitter) that their platform has become "complicated," leading them to work on a system that can seamlessly integrate all their tools.

This hints at a future where users might have the ability to choose between a basic model or an advanced reasoning format, aligning closely with Amazon's newly released hybrid model.

Although it may take some time for OpenAI to finalize this unification, Altman's approach suggests that Amazon's recent Claude update isn’t a definitive checkmate. While the hybrid reasoning model is appealing, it is unlikely that businesses currently utilizing ChatGPT will switch to Claude in droves.

Instead, the introduction of a dual-function model may generate some initial excitement for Amazon and potentially provide a modest boost to Amazon Web Services (AWS). However, in the longer term, it’s anticipated that multiple LLMs will be capable of hybrid reasoning, and OpenAI is expected to remain a significant participant in this arena in the future.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Spatacco has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

Amazon, OpenAI, AI