Roll Over, Cloud Czars

Spidey sense sees trouble when Amazon, Google, and Microsoft next report

If you don’t own stock in Cloud Czars like Amazon, Google, and Microsoft, I suspect you’ll be able to get them on sale a month from now.

My spidey sense tells me their third quarter earnings are going to be bad.

The biggest reason is on the cost side. Nvidia is holding everyone up for what it can get, because the combination of its hardware and software is what drives AI. In this AI revolution Nvidia is both Intel and Microsoft, both the chip and the operating system. At least so far. This means that if the three Czars re-selling their capacity want to help companies train Large Language Models and get value from AI, they must pay Nvidia’s price.

This won’t always be true. There’s a “sell-by” date on the Nvidia chokehold. This comes when the Czars can develop their own competitive, custom solutions. But Nvidia can use this time, and these profits, to build its own cloud network. By the time the turn comes, that network could be competitive.

Then there’s the revenue side. I’m seeing an intense amount of nickel-and-diming from the Czars right now. This is counter-productive when they’re facing a renewed push for regulation on both sides of the Atlantic. But it’s probably necessary because, without cash flow, the Czars lose their power.  

Where can they get cash? From you. That’s why they’re charging for stuff that used to be free, and charging more for what they sell. FitBit’s latest “upgrade” looks like a pitch to force customers to pay for its “FitBit Premium” service. Amazon putting ads into Prime Video, or charging $36/year to keep them off, seems to have the same motivation. Google itself no longer indexes the Web. I need to buy Authory to even see my old stuff. And Microsoft is doubling the cost of Office if you want any AI features.

The Czars wouldn’t be pissing off customers like this if they didn’t think they had to. Evil can be a rational choice when you’re up against it. At least in a corporate world it can be. But you’re going to get pushback, and I think you’ll see the start of that in the third quarter reports.