The cloud companies are designing their own chips, so hey, welcome to competitive capitalism.
Or maybe it's vertical integration monopoly. They're all guilty of it and ripe for getting dismembered.
From the Wall Street Journal, June 25:
Things are getting awkward for cloud incumbents as the AI chip giant eyes their turf
What’s Next for Nvidia
Cloud computing generates big profits for Amazon.com, Microsoft and Google. Now that cash cow faces a nascent threat with the rise of artificial-intelligence cloud specialists and a new industry power broker: Nvidia. MMNVDAMM
AI-chip maker Nvidia launched its own cloud-computing service two years ago called DGX Cloud. It has also nurtured upstarts competing with the big cloud companies, investing in AI cloud players CoreWeave MMCRWVMM and Lambda.
Those moves have yet to make an enormous dent, but a competitive shift is easy to imagine if computing demand continues to shift toward AI and Nvidia remains the sector’s principal arms dealer.
DGX Cloud is already growing fast. UBS analysts estimated when it launched that it could grow into a more than $10 billion annual revenue business. And CoreWeave, which listed shares on the Nasdaq in March, is forecasting around $5 billion of revenue this year.
Those businesses are limited by their narrow focus on AI computing, and they pale in comparison to the more than $107 billion of sales Amazon’s market-leading cloud business generated last year.
Yet any challenge in cloud computing would be worrying for Amazon: While the company’s cloud division accounted for 29% of its revenue in its latest quarter, it accounted for more than 60% of its operating income thanks to its high margins.
Microsoft and Alphabet’s Google, the next two largest cloud companies, have a lot to lose if the cloud-computing landscape shifts, too. Growing macroeconomic concerns are raising caution about IT spending. Google is under antitrust scrutiny in the U.S., and its golden goose—the search engine—is being challenged by OpenAI.
All the big cloud companies effectively offer AI chips for rent, many of them made by Nvidia, which has a market share estimated at around 80%. In what is perhaps a testament to Nvidia’s market power, though, the cloud companies are helping Nvidia grow its own cloud business.
Under DGX Cloud’s unusual arrangement, the cloud giants buy and manage equipment—including Nvidia’s chips—that forms the backbone of the service. Then Nvidia leases back that equipment from them and rents it out to corporate clients. It also offers access to its AI experts and software as part of the package.
That has left cloud-computing giants in an uncomfortable position. While they make money through the arrangement, they are also being asked to help a service that could compete with them. Some of them haven’t rushed to participate, even if they do eventually join up; Google was notably absent from a roster of companies participating in a DGX Cloud chip-rental marketplace announced in May....
....MUCH MORE
Facebook Meta would also be susceptible to antitrust action based on vertical integration analysis.
