The recent surge in cloud spending at Microsoft Azure, Amazon Web Services (AWS), and Google Cloud has caught the attention of Timothy Prickett Morgan from The Next Platform, prompting him to raise an intriguing question. How much of this seemingly impressive growth, he wonders, is actually being driven by investments in AI startups like OpenAI and Anthropic, funded by these very tech giants?
Recently, Microsoft has invested $13 billion in OpenAI, Amazon has committed $4 billion to Anthropic, and Google has contributed $2.55 billion to Anthropic as well.
These substantial investments may not only fuel innovation but, the tech expert warns, also inflate cloud revenues as the money circulates back into cloud spending on the infrastructure provided by these companies.
"Sugar daddy" investments
This situation, where nearly $20 billion has been invested in OpenAI and Anthropic, much of it likely used for cloud capacity to train and test generative AI models, creates a feedback loop. The investment in these AI startups returns as cloud spending, potentially making the revenue growth of cloud providers seem more substantial than it actually is.
As cloud providers continue to see increased demand for GPU-accelerated systems, driven by the rise of AI, their operating incomes have surged. AWS, for example, saw its operating income rise by 74 percent to $9.33 billion in the same quarter. But the sustainability of this growth remains uncertain, especially if a significant portion is fueled by these investment-driven loops.
The incremental $7.93 billion in core system revenues for AWS, Microsoft, and Google may be closely tied to their AI investments and the true test will be whether these growth rates can be sustained without relying on such "sugar daddy" investments to boost cloud spending.
Timothy Prickett Morgan asks, “How much of that [$7.93 billion] came from the nearly $20 billion these companies invested in OpenAI and Anthropic? How much came from the unknown number of AI startups these companies might also have stakes in and who got such stakes only because the companies knew they had to spend most of that money on cloud capacity to train their models?” It's a great question, and one we'd love to know the answer to.
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