Dave Vellante's Breaking Analysis: Cloud optimization wanes as AI slowly lifts off

Cloud spending amidst macroeconomic headwinds

Despite weathering dual headwinds of macroeconomic factors and the ability to optimize cloud spending over the past two years, the big four hyperscalers (Microsoft, Amazon, Google and Alibaba) reported $170-190B in IaaS and PaaS revenue in 2023. Hyperscaler revenue growth is accelerating rapidly, ranging from 18-19% in 2023. IT decision-makers are optimistic about spending in 2024, with a particular emphasis on the second half of the year. While cloud optimization is slowing, pockets of cost-cutting in the cloud remain.

AI's contribution to revenue

Despite AI's ubiquitous presence in the tech sphere, its revenue contribution is still relatively small. Microsoft's AI services are estimated to have generated approximately $800M in revenue in the last quarter. However, the big three US cloud players could see an uplift of $10B collectively this year due to generative AI.

Cloud spending by platform

Cloud spending varies across platforms, with Microsoft Azure generating the most revenue, followed by Amazon's AWS, then Google Cloud. Azure and AWS have cemented their lead as the two dominant cloud providers, with Alibaba maintaining a strong presence in China and the rest of Asia.

Intel's semiconductor manufacturing strategy

Intel's strategy to bring semiconductor manufacturing leadership back to the United States is imperative for the country's military, global competitiveness, and access to future technological innovations. However, Intel's strategy poses several challenges, including competition from established manufacturers like Taiwan Semiconductor and Samsung and disruptors like AMD, NVIDIA, AWS, Google, Microsoft, Apple, and Tesla. China, Inc. also looms as a long-term competitor, further emphasizing the need for Intel's success.

The future of data platforms

The current data stack must evolve to support new use cases and AI-powered apps that require real-time, massive-scale representations of a business. The next-generation data platform should combine the best of relational and non-relational capabilities, breaking the decades-old tradeoffs between data consistency, availability, and global scale. Further, a modular data platform should automate decision-making by combining historical analytic systems with transactions to enable AI to take action.

2023 Enterprise Technology Predictions

Predictions about enterprise tech forecasts are more uncertain and challenging than ever. Nonetheless, forecasts should be measurable and definitive enough to evaluate in a year. Our 2023 predictions included macro IT spending environment, cost optimization, security, generative AI, cloud, blockchain, data platforms, automation, and tech events.

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