Will Amazon Retain Its Cloud Supremacy?


  • Amazon has enjoyed a significant first mover advantage in cloud computing, enabling it to establish a presence that is much bigger than any of its competitors.
  • This enabled the company to finally gain in a fast growing market and enjoy high profit margins at the same time.
  • However, with the acceleration of AI and machine learning, Amazon's cloud position will face increasing competition.

Amazon (NASDAQ:AMZN) Web Services (AWS) seems equally unstoppable. Having built a large infrastructure needed for its e-commerce business, Amazon opened this infrastructure up for third parties in the form of AWS in 2006 (see here for a history).

For clients, this provides a number of obvious benefits:

  • Rather than having to incur the planning and upfront capital cost of building one's own infrastructure, clients can instantly fire up hundreds or even thousands of servers on a low variable cost basis, paying simply for what it needs.
  • It can be used for a whole variety of purposes, from simple storage to hosting advanced applications.

Cloud computing is a large and fast growing market opportunity, from Datamation:

According to IDC the public cloud computing market is on pace to double over the next four years, climbing from around $70 billion in 2015 to more than $141 billion by 2019. That huge market offers a tremendous opportunity for those companies that establish themselves as leaders in the cloud computing space.

Goldman Sachs is even more bullish (from Barrons):

The overarching theme is that cloud is still very young but will disrupt overall IT spending in a very big way in the next four years. They see public cloud spending rising from $32 billion this year to $137 billion in 2020. That's not including traditional software license revenue that Microsoft (MSFT) sells that moves to the cloud. Over that time, "we believe the public cloud market will continue to disrupt multiple industries, including servers, storage, networking, infrastructure software, data center construction, and data center outsourcing," areas that amount to $500 billion in spending now and will be worth $650 billion in 2020.

AWS has been hugely successful on several metrics. It's the biggest cloud company in the world, bigger than the three next competitors combined:

This article was written by

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Finding the next Roku while navigating the high-risk, high reward landscape

I'm a retired academic with three decades of experience in the financial markets.

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Finding the next Roku while navigating the high-risk, high reward landscape.

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Disclosure: I am/we are long AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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