The dominance of artificial intelligence (AI) and machine learning (ML) in discussions surrounding technology may mislead some into thinking that these are the top priorities for executives when it comes to cloud spending. However, according to a survey conducted by Jefferies analyst Brent Thill, chief information officers (CIOs) from 40 U.S. companies have revealed a different perspective.
In the survey, Thill analyzed cloud consumption habits, expectations, and planned spending over the next two years. Surprisingly, AI/ML did not rank among the top five priorities for CIOs in terms of cloud services. Out of nine categories, AI landed at a meager seventh place, contrary to Thill’s expectations.
Cloud spending refers to investments made in cloud-service providers, commonly known as “hyperscalers.” These include Amazon Web Services (AWS), Microsoft Azure, Google Cloud Platform (GCP), and Oracle Cloud Infrastructure. However, due to concerns about a potential economic downturn, businesses have become more cautious in their spending habits.
According to Thill, the CIOs’ primary concerns revolved around security, pricing, and applications. Interestingly, most CIOs anticipate an increase in their IT budgets for the years 2023 and 2024. In light of this, Thill suggests that AWS is currently in the best position within the cloud sector for the next 24 months.
While Amazon remains the leading cloud provider, Thill notes that Azure is not far behind. Among the surveyed CIOs, 48% identified AWS as their primary cloud provider, while 43% chose Azure. GCP and Oracle trailed behind with 8% and 3% respectively.
This survey sheds light on the evolving priorities and spending habits of CIOs in relation to cloud services. It reveals that, despite the buzz surrounding AI and ML, other factors such as security and pricing take precedence in their decision-making process. As the cloud industry progresses, it will be interesting to see how these priorities and preferences further evolve.
The Rise of Hyperscalers and AI Chip Sales
In the later part of 2023, leading tech giants, commonly referred to as hyperscalers, are projected to drive significant sales of chips produced by renowned companies such as Nvidia Corp., Advanced Micro Devices Inc., and Intel Corp. These chips will be utilized to expand data centers, preparing them to handle the immense workloads associated with Artificial Intelligence (AI). The increasing demand for AI technology has resulted in remarkable market performance for Nvidia, with its shares skyrocketing by over 200% this year alone. Similarly, AMD’s shares have experienced a notable surge of over 75%, contributing to the overall gains of the PHLX Semiconductor Index, which has witnessed a 50% increase in value throughout the year.
Furthermore, major technology players like Microsoft have invested substantial amounts of money in OpenAI’s ChatGPT, while Google provides generative-AI products such as Bard and Google Cloud enterprise offerings. In addition, Amazon offers complimentary machine-learning tools for users.
For Chief Information Officers (CIOs) who prioritize AI as a key component of their business strategy, GCP (Google Cloud Platform) appears to be the preferred provider. This preference is primarily due to the exceptional performance of GCP when it comes to AI/ML (Machine Learning) capabilities and the provision of analytics databases. Consequently, many CIOs have revealed their plans to increase spending on GCP.
Read: Nvidia CEO anticipates substantial growth in AI revenue over the next 12 months.
It is worth noting that Thill, a respected analyst, has given buy ratings on three tech giants – Amazon, Microsoft, and Alphabet.
Despite the economic challenges faced this year, Amazon’s shares have surged by 60%, while Microsoft’s shares have seen a commendable increase of 42%. Similarly, Alphabet’s shares have recorded a positive growth of 40%, and Oracle’s shares have exhibited an encouraging rise of 44%.
In terms of market performance, the tech-heavy Nasdaq Composite Index has experienced a remarkable rally of 35% throughout the year. The Dow Jones Industrial Average, which comprises Microsoft as one of its 30 components, has shown a 4% increase. Additionally, the S&P 500 has advanced by 17%.
Read: AMD and Nvidia navigate “tight” budgets imposed by cloud-service providers, despite the growing AI market.
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