Platformonomics TGIF is a weekly roll-up of links, comments on those links, and perhaps a little too much tugging on my favorite threads.
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You’re all no doubt recovering from this week’s CAPEX festivities.
News
Follow the GPUs: Cloud CAPEX
We’re wrapping up the Superbowl for CAPEX obsessives, when the hypercloud companies reveal their annual infrastructure investment. After a few boring years, CAPEX is back to the center of the world as generative AI requires new (and expensive) infrastructure. As in the early days of cloud, CAPEX is a great tell on who is actually investing in AI and who is just bloviating (obligatory notice: you can’t spell bloviating without A and I). I’ll publish a full breakdown in the next couple days, but will leave you with a few tastes here.
Collectively, Amazon, Google and Microsoft’s corporate CAPEX spending (so more than just cloud infrastructure) was nearly unchanged from 2022, while their cumulative CAPEX spending this century passed $820 billion. But Amazon continues to drop from their #bonkers pandemic spend, while Google was up just 2% and Microsoft up 45% (GPUs!):
Amazon’s new-found restraint expanded beyond the retail business this year, with AWS CAPEX spending declining for the first time ever, even as AWS revenue grew by 13%:
Stay tuned for the full annual report.
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Antitrust Incoherence: Roomba Edition
Another scrapped acquisition underscores the utter incoherence of antitrust policy today. It should be obvious we need a coherent doctrine that gives everyone a sense of where the lines are on the playing field.
Roomba was a middling, non-strategic acquisition in a competitive market, but nicely illustrates the insanity of the different doctrines in play today:
- European Antitrust (EU) prioritizes protecting European firms (like this Bosch robotic vacuum cleaner boasting of its “five ways vacuuming just became more fun”!) and raising revenue from American tech firms (after all, a continent can’t live just on wine and cheese).
- Hipster Antitrust (US FTC) says no to all Big Tech acquisitions, because Big Tech is Bad! (The hipster antitrust white whale is the Instagram acquisition, and some day, they fear, some other acquisition might also be successful). The middlemen oligopolies at the heart of our insanely bloated and inefficient healthcare system? Evidently not an antitrust problem.
- VC Antitrust says yes to all acquisitions because, dammit, nothing is more important than VC returns. (I have yet to hear a coherent antitrust argument for approving Adobe’s failed acquisition of Figma, which runs afoul of traditional antitrust. And note the FTC didn’t actually move against the Figma acquisition, providing yet another huge indictment of their priorities).
Needless to say, none of these are good doctrines.
And note private equity gets credit for putting Roomba into “a debt straightjacket” after the deal was scrapped. When private equity comes amalgamating, it is always time to start migrating.
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Private Equity in Action: Data Centers
“This is Blackstone Inc.’s bet on the AI revolution.”
Just putting a marker down on this one.
IBM and the Art of Misleading Investors
IBM opened their Q4 earnings release with:
“In the fourth quarter, we grew revenue in all of our segments, driven by continued adoption of our hybrid cloud and AI offerings. Client demand for AI is accelerating and our book of business for watsonx and generative AI roughly doubled from the third to the fourth quarter,” said Arvind Krishna, IBM chairman and chief executive officer.
You’d almost think IBM was an AI company and seeing real revenue from AI. But when asked to “elaborate specifically on exactly what the book of business means”, much bobbing and weaving ensues:
So Toni, on the AI book of business, this is not all revenue in the quarter. I would just begin with that statement to set it straight. At this stage, we wanted to start looking at what is our momentum, what is the sentiment from our clients. So we went to a measure that is more reflective of, I’ll use the word signings. What is the commitment the clients are making to us? Consulting is straightforward. It is the signings. Consulting signings are anywhere from 12 to 24 months on average is how much time they play out over there. And on software, it’s what they’re committing to. And we are using SaaS ACV. So it’s a 12-month commitment, which is typical for as a service as well as, since we do offer our portfolio both ways as license or as a service, it includes the license piece as well. Now over a long-term, let’s call it a couple of years or more, yes, the book of business should turn into an amount of revenue in a quarter, but that’s going to take a bit of time to catch up. But we felt that this gives the better indicator right now of what is our traction and what is our acceleration in that part of the business.
IBM is running the same playbook they ran for cloud. Chant the buzzwords and hope investors won’t notice IBM isn’t actually investing and don’t have competitive products. As with cloud, IBM’s AI results are not something they actually report to the SEC, yet lead with in investor communications.
Move Fast and Regulate Things (You Don’t Understand)
“The first law of this kind”. Indeed.
The GPU Chip Race
I spoke to the New York Times about the big tech companies creating their own GPUs to get out from under NVIDIA’s thumb. In my defense, this is a rare topic where the Times doesn’t have a conflict of interest in their tech coverage.
“Supercloud”: Still Dead
I’m not sure if this is an attempted exit strategy (finally!) or yet another demonstration that “supercloud” has always been a definitional random walk with a dash of Tourette’s Syndrome (more likely), but the sultans of “supercloud” are taking a victory lap for a “prediction” that their architectural baby is just CloudFlare. And if CloudFlare had a good year, so too must have “supercloud”! Never mind that the majority of prior definitions explicitly excluded the idea of CloudFlare being the Platonic form of “supercloud”. But they do seem to have finally noticed that generative AI is a thing so hopefully they’ll move onto that and dial down the supercloudifragilisticexpialidociousness.
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Trade Surplus Region Complains Trade Deficit Region is “Protectionist”
Mercantilist nations with surplus manufacturing capacity have concerns about where they will be able to dump their surplus.
Useful Idiots, Fellow Travelers and Unregistered Foreign Agents: Harvard University
Henceforth we shall refer to China as West Taiwan.
With Twitter engagement circling the drain, please comment here.
