Big Tech Holdings Embracing AI for Cloud Growth
Alphabet (GOOGL), Microsoft (MSFT), and Amazon (AMZN) continue to invest in AI technology to boost cloud growth, which has been slowing since 2022 due to economic uncertainty. The increasing popularity of AI is expected to help revive the revenue growth rates in the sector as the demand rises. Amazon’s year-to-date growth is at 44% while Alphabet and Microsoft have advanced nearly 39% and 35%, respectively.
These developments impact not only the three tech giants but also other companies like Nvidia (NVDA), whose chips are crucial for running AI models. The adoption of AI is beneficial for Amazon Web Services (AWS), Google Cloud, and Microsoft’s Azure business, despite revenue growth slowing down for all three cloud computing units.
Google’s Enterprise Search and Partnership with Salesforce
Google is currently testing an AI-powered service called Enterprise Search on the Generative AI App Builder, allowing companies to create custom chatbots and search applications. The service is expected to benefit the healthcare industry due to its large amounts of data management. Google also announced an expanded partnership with Salesforce (CRM) to integrate Google Cloud’s AI functions for insights into customer data.
Microsoft’s Azure Government Cloud and OpenAI
Microsoft’s Azure Government cloud is now offering the technology that powers popular AI tool ChatGPT, enabling U.S. government customers to benefit from generative AI. Azure Government customers can access OpenAI’s large language models—GPT-4, GPT-3, and Embeddings—to improve efficiency and unlock insights from their data. The Defense Technical Information Center is planning to explore the use of OpenAI’s models.
Amazon and Nvidia’s Data-Center Chips
Piper Sandler expects AWS’s revenue growth to reaccelerate due to Nvidia’s strong Q1 2024 earnings, which showed high demand for data-center chips that power generative AI models. According to the firm, there is a roughly 98% correlation between Nvidia and AWS data-center revenues since 2017. Piper Sandler increased its price target on Amazon shares to $150, from $130, while maintaining an overweight or buy rating on the stock.