Since 2021, Adept has been developing its agentic AI.
As we learned yesterday, agentic AI is a form of artificial intelligence designed for autonomy.
The AI is given agency. It is designed with a more human-like workflow process to solve problems or tasks through a number of steps or iterations used to improve the outcome.
So it came as no surprise when software giants Atlassian Ventures, Service Now, and Workday all invested in Adept. The use cases for applying AI to their software – for programming, customer service, human resources, and finance management – were obvious.
But after raising several hundred million, Adept found itself in a pickle over the last year amid the generative AI frenzy taking the world by storm.
To stay relevant and compete with the likes of OpenAI, Google, Anthropic, and xAI on the bleeding edge of generative AI technology, it would need to raise at least a billion dollars to develop a full stack of AI technology, including its own large language model (LLM) like ChatGPT…
Or refine its technology focus.
On June 28, we found out which path Adept took to move forward.
And it’s not a normal path.
None other than Amazon stepped in and hired the co-founder and CEO of Adept, as well as four other Adept co-founders and an unspecified number of Adept employees.
They will all be joining Amazon’s artificial general intelligence (AGI) autonomy team.
Sounds like an acquisition… or an acquihire, right?
No, it’s not. That’s what Amazon executives would say…
After all, Amazon has agreed to license Adept’s agentic AI technology.
For how much, we don’t know.
Adept was worth a $1 billion post-money valuation after its February 2023 deal based on a pre-money valuation of $650 million. [break]
If I had to guess, Amazon’s deal with Adept is worth a bit more than $650 million over the next few years – a figure that would ensure that all of Adept’s investors are made whole with the earliest investments making a nice multiple. Everyone will win to some degree.
Some of you are probably thinking we’ve seen a deal like this before…
That’s right, we have. We learned about a similar deal that Microsoft did with Inflection AI in Outer Limits – Microsoft’s AI Shell Game. Microsoft hired most of the team at Inflection AI while still licensing Inflection’s technology for, ironically, $650 million. It was one of the most sneaky and fascinating deals I’ve ever seen and is definitely worth reading up on.
Both deals flowed after Microsoft’s massive $13 billion investment in OpenAI, which is structured only with an observer’s seat on the board.
And yet, Microsoft effectively has a controlling interest in OpenAI, and it’s the only company to have access to OpenAI’s source code.
The game is obvious.
These powerful, multitrillion-dollar companies have lots of clever lawyers at their disposal. And they’ve been working feverishly to structure deals in such a way as to hopefully avoid regulatory scrutiny over the most coveted prize of all…
Microsoft, Amazon, Alphabet (Google), and Meta (Facebook, Instagram) already have a massive advantage given their dominant market positions – and seemingly unlimited capital reserves – for developing an artificial general intelligence.
But what they need is the talent to make that happen, which is why these deals are taking place.
And when we think about Amazon and Adept’s technology, it’s easy to understand why it makes so much sense.
In 2012, Amazon spent $775 million to acquire robotics company Kiva Systems.
Kiva was a specialized robotics company focused on distribution, logistics, and warehousing. It became the foundation for Amazon’s robotics division.
Source: Amazon
At the time of the deal, Kiva gave guidance that it would continue to support its existing customers despite the Amazon acquisition. But Amazon sucked up all of Kiva’s production…
By 2015, Kiva was renamed to Amazon Robotics and its technology was no longer available outside of Amazon. It was such a strategic asset that Amazon didn’t want any of its competition to have access.
And taking Kiva off the market left a major hole in the industry at that time.
Now, what if we just imagine…
What if we give Amazon Robotic technology – like its robotic arms or inventory movement systems – Adept’s agentic AI technology?
Suddenly it all makes sense.
If we think about the transactional nature of Amazon’s e-commerce business, Adept’s technology is also a perfect fit. Amazon, in many markets, has already become the best search engine for products. Amazon is the world’s largest marketplace.
Imagine being able to speak with Amazon’s Alexa with a voice prompt to research the best product for your needs, at the best possible price, and get it to you just in time for when you need it.
Imagine confiding in Alexa that your six-year-old grandson is having trouble reading… and you need ideas and tools that have proven successful to help support him.
Maybe you’d like Alexa to remember that you’re hosting Thanksgiving this year for 20 people, and you need a new table setting of (ideally) discounted items in the next few months. “Please let me know when you find something, Alexa.”
Or the one we all want and need…
“Alexa, here are 12 birthdays to remember this year. Two weeks before each, please suggest the best gifts for them and send them to the respective addresses. In gift wrapping. With a nice note.”
I’m telling you, it’s coming.
Amazon is already working on a competitor to OpenAI’s ChatGPT.
The internal name of the project is Metis.
And Amazon has both the capital and the computational power to develop something on par with OpenAI, Meta, Alphabet, or xAI.
Alexa is about to get a major upgrade…
And Amazon has both invested in and has been testing Agility Robotics’ Digit – a bipedal robot used (at the moment) for logistics and warehousing applications.
Source: Agility Robotics
Not only is Adept’s technology relevant to a robotics platform like Digit, but it is also technology that could be extended for consumer applications.
We should expect that Amazon will use the same playbook with Adept as it did with Kiva. Why would it want competitors to gain access to such powerful technology that will open up massive markets for Amazon?
Microsoft will continue to do the same, but it has already found itself under regulatory scrutiny with the FTC over the Inflection deal.
So much is at stake.
If I had to guess, I’d say that Microsoft and Amazon are structuring the deals… knowing that it just buys them time, thus a competitive advantage.
Regulatory proceedings typically take years to unfold. They know that they can keep steamrolling… and deal with the aftermath later.
It doesn’t matter what it costs.
There’s too much at stake.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
