Amazon’s cloud business faces critical tests after rival Microsoft, Google stumbles
Deborah Mary Sophia
(Reuters) – In a tedious report by Microsoft and Google, the pressure on Amazon.com was creating high expectations for cloud computing in its fourth-quarter results on Thursday.
Stocks of major tech companies have soared over the past two years as it is believed that huge data center demand for AI technology will power years of investment.
But it’s in the Chinese startup DeepSeek said it made an AI breakthrough at a fraction of the cost, exacerbating the sell-off of technology stocks that some say are overdue.
Still, Amazon is leveraging cheap AI better than its competitors because of its massive cloud business and lower exposure to expensive large language models like Chatgpt, analysts say.
Amazon Web Services, the world’s largest cloud service provider, is expected to publish with eight-eighth revenues rising by one-eighth, according to data compiled by LSEG.
However, both Microsoft and Meta were forced to defend their AI spending plans last week, while Google Parent Alphabet shares fell 8% on Wednesday after it said it would spend more on CAPEX than analysts expected.
“Microsoft and Google’s performance has made Amazon’s cloud growth even more obvious,” said Dave Wagner, portfolio manager at Aptus Capital Advisors.
“But if Amazon can smash it to their cloud count, the market will absolutely love the report.”
The company was the first major cloud provider to accept DeepSeek on its AI model last month and said its capital expenditure, mainly AI, will exceed its estimated $75 billion in 2024.
The slowdown in growth of Microsoft Azure and Google Cloud, the second and third largest cloud players, has sparked caution among analysts about AWS performance.
“Microsoft says this is capacity-limited, and Google says its capacity is limited. Amazon is likely to say that it may be limited, which is why its growth rate does not exactly meet the market’s possible expectations,” said lead analyst at Tech Research. Bob O’Donnell said.
Some analysts believe that the competitor’s weakness is that Amazon may have caught up with the mark of the AI competition through hard work, including doubling its investment in anthropomorphism and offering a variety of AI models on its cloud platform.
“We actually think AWS is regaining its share. Its growth is a lot slower than Microsoft Azure and Google Cloud, but we believe that as Amazon gets stuck in AI products, it may slow down Big Davidson analyst Jill Luria (Gil Luria) said.
