{"id":77323,"date":"2023-10-27T02:39:31","date_gmt":"2023-10-27T06:39:31","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/opinion-amazons-ai-talk-is-making-wall-street-drool-but-there-seems-to-be-a-catch\/"},"modified":"2023-10-27T02:39:34","modified_gmt":"2023-10-27T06:39:34","slug":"opinion-amazons-ai-talk-is-making-wall-street-drool-but-there-seems-to-be-a-catch","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=77323","title":{"rendered":"Opinion: Amazon\u2019s AI talk is making Wall Street drool, but there seems to be a catch"},"content":{"rendered":"
\n

Amazon.com Inc. investors were willing to look past a soft holiday-quarter outlook once executives spent the bulk of the company\u2019s earnings call talking up big opportunities in the cloud fueled in part by artificial-intelligence deals.<\/p>\n

But there seems to be a catch.<\/p>\n

\n

It\u2019s easy to get carried away thinking about the potential in generative AI, which can unlock more tech spending by companies looking to jump on the bandwagon. Yet corporate customers are still trying to find their footing with the nascent technology, as they play around with potential applications and get a better sense of their costs and benefits.<\/p>\n

\u201cThe only certainty is that there will continue to be a high rate of change,\u201d Amazon
\n AMZN,
\n -1.50%<\/bg-quote>
\n Chief Executive Andy Jassy said on the company\u2019s earnings call. \u201cI think we are very early in generative AI\u2026.so many companies are doing all sorts of prototypes.\u201d <\/p>\n

Jassy, who led Amazon\u2019s AWS cloud-computing business before he got the CEO nod, noted that many customers test models, like large language models for AI, and then plug those into their own software applications. \u201cAnd what a lot of companies figure out quickly is that using\u2026the large models and the large sizes ends up often being more expensive than what they anticipated.\u201d<\/p>\n

In other words, companies may be showing some interest in AI experimentation now, but they may not necessarily go through with all these projects over the long haul, or they could scale down the web services they purchase.<\/p>\n

Plus, revenue for the cloud business can be hard to predict. \u201cDeal volume tends to be lumpy\u2026and it doesn\u2019t perfectly distribute over a calendar year,\u201d Jassy said. <\/p>\n

That dynamic is already manifesting and could partly explain why Amazon came up about $100 million short of estimates with its cloud-computing revenue in the latest quarter. Jassy highlighted some new contracts that Amazon got for its AWS business in September but that won\u2019t start until October, so they will be reported in the fourth quarter.<\/p>\n

He also mentioned some \u201creally big public-sector deals that won\u2019t hit for a period of time.\u201d<\/p>\n

\u201cAll these deals don\u2019t hit in a month,\u201d he said. \u201cThey happen over a period of time.\u201d <\/p>\n

Additionally, as the economy has turned in the past year, deals are taking longer and companies are bringing more people into the decision-making process. \u201cWe are starting to see companies look forward more,\u201d he added.<\/p>\n

Then there was the dreaded talk of \u201coptimization,\u201d a term that refers to how companies are trying to get the most for their money when it comes to data-center assets. Jassy used the word a dozen times on the earnings call, joining executives at Alphabet Inc.
\n GOOG,
\n -2.55%<\/bg-quote><\/p>\n

GOOGL,
\n -2.65%<\/bg-quote>
\n and Microsoft Corp.
\n MSFT,
\n -3.75%<\/bg-quote>
\n earlier in the week who also highlighted the trend. <\/p>\n

Amazon\u2019s biggest rival in cloud services, Microsoft, was the No. 1 public cloud services provider for 2022, with 16.2% market share, according to IDC. AWS, formerly No. 1 for years, was right behind it at No. 2, with a 13.5% share of the $545.8 billion worldwide cloud services market. <\/p>\n

This year, it\u2019s even feasible that Microsoft could take more share. Its Azure cloud business reported a better-than-expected quarter earlier this week, and the company has an investment in and partnership with OpenAI, the creator of ChatGPT. Microsoft also has promising early AI offerings, including Copilot for its GitHub development platform and for Office 365. <\/p>\n

Microsoft\u2019s latest results got a far better reception than those from Alphabet, which spooked analysts as the Google Cloud business slowed to its lowest growth rate since 2019.<\/p>\n

Amazon shares were choppy in the extended session following Thursday\u2019s report, but they ultimately ended up about 5% higher. <\/p>\n

But investors cheering the company\u2019s AI-fueled cloud opportunities should be aware that Amazon is not likely to experience hockey-puck-shaped growth.<\/p>\n

Amazon may seem a big AI play itself, but it appears to be an inconsistent one, at least for now. <\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Amazon.com Inc. investors were willing to look past a soft holiday-quarter outlook once executives spent the bulk of the company\u2019s earnings call talking up big opportunities in the cloud fueled in part by artificial-intelligence deals. But there seems to be a catch. It\u2019s easy to get carried away thinking about the potential in generative AI, […]<\/p>\n","protected":false},"author":1,"featured_media":77324,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-77323","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nOpinion: Amazon\u2019s AI talk is making Wall Street drool, but there seems to be a catch | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Amazon.com Inc. investors were willing to look past a soft holiday-quarter outlook once executives spent the bulk of the company\u2019s earnings call talking\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=77323\" 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