🔬Kings of Cloud

I’m currently on vacation in Mexico so today is a short note just so you know I was thinking about you.

Love,
Ryan

Kings of Cloud

The story for the past year has been the AI boom but most of the conversation has been focused on Nvidia, TSMC and the other chip players. However, arguably the biggest long-term beneficiaries of this big data transition are the incumbent cloud players that appear to have built insurmountable moats around their data center franchises.

Amazon’s Amazon Web Services (AWS), Microsoft’s Intelligent Cloud (including Azure), and Alphabet’s Google Cloud currently hold about 2/3^rds market share in the cloud infrastructure market. And that’s probably not changing anytime soon.

Since the end of 2021, the growth these players have experienced in their respective cloud franchises has been enormous, with the huge demand for AI compute as the fuel that turned an already double-digit-plus growth business into one of the greatest profit centers in history.

Recently the only constraint to growth has been the scarcity of Nvidia chips to satisfy demand.

Combined, the three cloud divisions finished 2023 with a total of $162 billion in revenue. The Street expects this figure to strike $380 billion by 2028, making it one of the largest single industries in the world.

Moreover, these businesses are also highly profitable and now represent the driving force behind the growth of Amazon, Microsoft and Alphabet. To put that into better context, Cloud is now the growth engine for the the #1 (Microsoft), #4 (Alphabet) and #5 (Amazon) largest companies in the US.

Truly game changers, and core to the investment thesis of these three companies for years to come.

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