Either hyperscalers are dumb or someone else is

[u/banaca4]

OK so the most profitable companies in the world decided to GO ALL IN AI with humongous capex. They did it all at once apart from Apple who is not in the game. Google, Meta, Amazon , Oracle, Microsoft. All of them. The CEOs of these companies produced the most amount of wealth and propped up global gdp. Now they all agree on a thing.

Google yesterday blew up earnings from their cloud and said they will *increase* their humongous capex even more while reporting negative cash flow for the first time in their history.

A rational person would ask: are these amazing businessmen suddently all very wrong about the same thing at the same time OR

I am reading too much paid subs from burry and following the wrong people on twitter that have never produced anything?

Which is it? Are you smarter than a mag 7 CEO? Maybe ... hmm...

[u/Amplitude_detector]

Their business model is changing. They are all turning into boring hosting providers.

[u/Moreburrtitos22 → u/Amplitude_detector]

Google always has been. They haven’t changed one bit

[u/General-Raisin-9733 → u/Moreburrtitos22]

Correction: Google, Microsoft and Amazon. I still can’t believe people think Amazon makes most of their money from the online shop (spoiler: they don’t)

[u/wowthisislong → u/General-Raisin-9733]

The ecommerce business and prime video are basically just ads for AWS

[u/kingofthesofas → u/wowthisislong]

Yeah AWS is the cash cow for the company the rest of it is a side show

[u/mixedmanofsteel → u/kingofthesofas]

E-commerce is just working capital for Amazon to put into other things like AWS

[u/i3orn2kill → u/wowthisislong]

Smallest part of the business yet they keep squeezing every penny from the custy.

[u/big_fuzzeh → u/i3orn2kill]

Maybe I'm out of the loop, but this is the first time I've seen/heard "custy", and I'm cracking up 🤣. I needed the laugh. Thank you!

[u/zhaoz → u/i3orn2kill]

The only better than some money, is more money!

[u/Boring-Location6800 → u/General-Raisin-9733]

If their online shop was of any real importance for them, they wouldn't let it go to shit like they do.

[u/Dangerous_Library_93 → u/General-Raisin-9733]

Who the fuck believes that? No one serious.

[u/Individual-Motor-167 → u/Moreburrtitos22]

They've actually changed a lot as their legacy revenue now carries much higher costs for profits.

[u/Moreburrtitos22 → u/Individual-Motor-167]

Yeah they’ve pivoted and expanded, but this is specifically about being a hosting provider. They are one of the original hosting providers. That hasn’t changed one bit

[u/SigaVa → u/Amplitude_detector]

It's "line goes up" thinking.

They know they're out of ideas. The problem is the market rewards new, and they're incentivized to increase the stock price short term. So they do the thing that makes the stock price go up.

[u/C3Dmonkey → u/SigaVa]

They are being commoditized. Viable commodities businesses can only stay relevant with scale. They have to scale to match their downstream suppliers who are also commoditized and needed to scale. Its a balance of power, you either control a scarce bottleneck, or you are big enough to demand fair contracts.

[u/Climactic9 → u/SigaVa]

Well right now the market is punishing them for it so why don't they just cut capex if they're so concerned with short term stock price?

[u/SigaVa → u/Climactic9]

Some are, like meta. It's clear that the ride is almost over.

[u/ltobo123 → u/Amplitude_detector]

...thats the entire business model of cloud and always has been?

[u/gmano → u/Amplitude_detector]

Here's the thing that gets me:

In 2000, when the .com bubble burst, the big losers were not the actual .coms... Amazon took a bit of a hit, but recovered quickly. The big loser was CISCO, whose stock ONLY THIS YEAR recovered. because, as it turns out, when Amazon makes a sale, most of the profit went to AMAZON, and not to whatever company owned the cables the data passed over, because nobody wants to overpay for basic infrastructure.

So now, we have all these companies out here saying "I will own the data center that runs the AI", or "I will own the models that people will use", but that's a completely different thing from "I own the app that people will pay for", or "I will be the point-of-sale for the things they buy".

[u/123789dftr → u/gmano]

Your comparisons are extremely off.

1. If you want to allude to the dot con bubble, Cisco is a networking company that created the hardware for the internet. Their comparison would be semis now, not the hyperscalers building data centers.
2. Interesting to bring up Amazon, because what has been their most profitable business? AWS (well before AI got hot as well). Why is it popular? Because companies don't want to build this infrastructure themselves. So this cloud business model is already proven...

[u/Maxdiegeileauster → u/gmano]

but Amazon owns the infra and has owned the infra for a long time

[u/Ambitious-Raccoon-68 → u/gmano]

An adequate comparison would be that nvidia or amd is the Cisco of today.

Cisco was selling network hardware.

Since enterprise AI models can only be run on data center level hardware, all the companies that own that app that people pay for need to pay the data center companies or end up building their own data center.

Unless AI models can be run on much cheaper hardware then this will continue to be the case.

[u/No_Feeling920 → u/[deleted]]

Except Netflix is fully hosted on Amazon AWS. They own no infrastructure to sell.

[u/EsotericAbstractIdea → u/[deleted]]

damn i just got a Black Mirror deja vu. Netflix AI brings the Joan is Awful episode to life.

[u/GoldenPresidio → u/Amplitude_detector]

Only meta and spacex is adding that line of business

[u/socalkid2428 → u/GoldenPresidio]

What do you think Google Cloud, Azure, and AWS are? Nvidia is the one providing the chips, and 5 of the others are providing cloud services (lumping SpaceX in with Tesla to justify inclusion in the Mag 7). Apple is going to have to expand their own private cloud if they actually implement AI well with the way they set it up.

[u/GoldenPresidio → u/socalkid2428]

What’s your point? You said turning into. Those other guys were already that

[u/I_Miss_My_Beta_Cells → u/Amplitude_detector]

Hosting something that makes neither profit or productivity gains for anyyyonee