For the last several quarters we’ve seen a lull in the expansion of the cloud infrastructure market, with lower growth numbers than we’ve been accustomed to seeing in the past. That changed this quarter thanks in large part to interest in generative AI. The new revenue wave began just last year, driven by the ChatGPT hype cycle, but has already pushed cloud infra revenue in the fourth quarter of 2023 to $74 billion, up $12 billion over last year at this time and $5.6 billion over Q3, the largest quarter-over-quarter increase the cloud market has experienced, per Synergy Research.
The cloud infrastructure market for the entire year grew to an eye popping $270 billion, up from $212 billion in 2022. Synergy’s John Dinsdale predicts that the growth we saw in the last year is here to stay, even as the market continues to mature and the law of large numbers takes increasing effect. “Cloud is now a massive market and it takes a lot to move the needle, but AI has done just that. Looking ahead, the law of large numbers means that the cloud market will never return to the growth rates seen prior to 2022, but Synergy does forecast that growth rates will now stabilize, resulting in huge ongoing annual increases in cloud spending,” he said in a statement.
This is the best summary I could come up with:
Synergy’s John Dinsdale predicts that the growth we saw in the last year is here to stay, even as the market continues to mature and the law of large numbers takes increasing effect.
Jamin Ball, a partner at Altimeter Capital, writing in his excellent Clouded Judgement newsletter, sees a similarly bright future for these vendors:
Synergy reports that the Big 3 constitute 67% of overall market share, or approximately $50 billion in total cloud revenue coming from the three largest companies for a single quarter.
One thing was clear last year, Microsoft was putting the heat on Amazon and left the company on its heels, perhaps for the first time, with its aggressive deal making with OpenAI.
Scott Raney, a partner at Redpoint, told TechCrunch at re:Invent in December that Amazon was clearly playing catch up when it came to AI, and it was an unusual place for the company to find itself.
Whether Microsoft’s aggressive approach to AI represents a similar advantage isn’t clear yet, but it’s hard to ignore a two percentage point market share increase in a single quarter.
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