By Alistair Barr
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- A version of this story originally appeared in the BI Tech Memo newsletter.
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For nearly two decades, Amazon Web Services was the foundation of the internet's first great building boom. Startups didn't need to buy servers or manage data centers because AWS provided the infrastructure and tools for the cloud economy. But the rise of generative AI has ushered in Cloud 2.0, and the blueprints are changing fast.
Internal Amazon documents reveal that AI startups have been delaying AWS adoption, diverting early budgets toward AI models and tools, inference platforms, and new "neoclouds" that sell GPU access, according to a blockbuster scoop from Business Insider's Eugene Kim.
Instead of relying on AWS for traditional cloud compute and storage, founders are starting with OpenAI, Anthropic, and AI tool providers such as Vercel, along with specialized GPU providers like CoreWeave. For AWS, that's a seismic shift: the startup ecosystem that once fueled its dominance is now building elsewhere first. This is not me telling you this. It's in Amazon's own words.
Back in 2023, I told you how the Cloud 2.0 era is defined by a new stack of specialized hardware, models, APIs, and developer tools. Many of these are outside the control of traditional cloud giants, and they are less sticky than traditional services such as compute, storage, databases, and analytics.
This could be one reason why AWS growth has lagged other cloud providers that have more AI goodies to offer startups. Take the second quarter of this year. Microsoft and Google generated cloud revenue growth of more than 30%, while AWS was under 20%. Newer AI cloud specialists are growing 200% or more, albeit from a much lower base.
Don't get me wrong: AWS is still the cloud king with the most market share. It has promising AI partnerships, especially with Anthropic. Yet as AI reshapes startup spending priorities, the question is whether AWS will still sit on this throne in five or 10 years' time.
Kim asked Amazon for comment on all this, and they sent a long statement. You can read the company's responses in the main story here.
Sign up for BI's Tech Memo newsletter here. Reach out to me via email at [email protected].
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