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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News
Q2 CAPEX Scorecard
Summary:
- Big CAPEX spent over $58 billion this past quarter. 90%+ of that goes to cloud/AI infrastructure, except for Amazon (AWS is maybe half of their number)
- Amazon: $17.86B +52% (includes fulfillment spending)
- Google: $13.2B +91%, new all-time high, exceeds full CY17 spend
- Meta: $8.47B +33%
- Microsoft: $19B +79%, new all-time high, exceeds full CY19 spend
- Amazon and Microsoft said they were capacity constrained for AI infrastructure
- All four companies offered up some form of “the risk of underinvesting in AI infrastructure is greater than overinvesting”.
- Those halcyon days when we were all (briefly) CAPEX enthusiasts and obsessives are definitely over. The Wall Street handwringers really want to see more revenue from AI CAPEX sooner and would prefer those investment dollars instead go into (high fee) speculative financial vehicles.
Previous:
Q1 CAPEX Summary Scorecard (Final), Follow the CAPEX: Cloud Table Stakes 2023 Retrospective, Follow the CAPEX: Triangulating NVIDIA, Platformonomics ClownWatch™, Follow the CAPEX: The Clown Car Race Checkered Flag, The CAPEX Hype Cycle, CAPEX, We Are All Now CAPEX Obsessives, From CAPEX Obsessives to Cynics
Q2 Amazon CAPEX
After their first down year ever in AWS infrastructure spend in 2023 and a couple years of digesting their bonkers pandemic fulfillment build-out, Amazon’s CAPEX is finally ramping up again to the highest level in ten quarters. They expect AWS infrastructure to be over half of their spending for the rest of year.
Guidance: MOAR CAPEX!!!
Now let’s turn our attention to capital investments. As a reminder, we define these as a combination of CapEx plus equipment finance leases. For the first half of the year, CapEx was $30.5 billion. Looking ahead to the rest of 2024, we expect capital investments to be higher in the second half of the year. The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative AI and our non-generative AI workloads. For the third quarter, specifically, I’d highlight a few seasonal factors to keep in mind.
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Q2 Google CAPEX
Guidance: MOAR CAPEX!!! ($50B this year!)
Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx.
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Q2 Meta CAPEX
Guidance: MOAR CAPEX!!!
We anticipate our full-year 2024 capital expenditures will be in the range of $37-40 billion, updated from our prior range of $35-40 billion. While we continue to refine our plans for next year, we currently expect significant capital expenditures growth in 2025 as we invest to support our artificial intelligence research and product development efforts.
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Q2 Microsoft CAPEX
Note that Microsoft’s CAPEX numbers understate their total AI infrastructure capacity, as they are also major if not the largest customer of various boutique GPU hosters including CoreWeave, Lambda, and Oracle.
Guidance: MOAR CAPEX!!! (sequential growth expected from what was by far their biggest CAPEX quarter ever):
We expect capital expenditures to increase on a sequential basis given our cloud and AI demand, as well as existing AI capacity constraints.
Notable: Microsoft is really building out its data center footprint that can be lit up as needed:
Cloud and AI related spend represents nearly all of total capital expenditures. Within that, roughly half is for infrastructure needs where we continue to build and lease datacenters that will support monetization over the next 15 years and beyond. The remaining cloud and AI related spend is primarily for servers, both CPUs and GPUs, to serve customers based on demand signals.
The record finance lease spend ($5.1B) suggests they populated a lot of that data center space this quarter. It could be multiple GPT-5-scale training clusters.
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Antitrust Incoherence: Google Verdict
So Google has been deemed a monopoly and paying for preferred distribution through others’ browsers deemed illegal behavior. (Reminder: being a monopolist is not in itself a problem, but people have all kinds of opinions about what you can do as a monopolist).
What perplexes me is the complete lack of concern about Google tying their search monopoly with their own browser (Chrome). I remember a time when the Federal Government was greatly incensed about the tying of a monopoly asset with a monopolist’s browser. But antitrust coherence is a lot to ask.
Google also faces a second US antitrust case accusing it of monopolizing online advertising. They could become the world’s first two-sided monopolist!
Previous:
Antitrust Incoherence: Competitive Harassment Edition, Antitrust Incoherence: Don’t Forget Microsoft, Antitrust Incoherence: Isn’t Market Division Illegal?, Antitrust Incoherence: Roomba Aftermath Edition, Antitrust Incoherence: Apple Edition, Antitrust Incoherence: Spotify Edition, Antitrust Incoherence: Roomba Edition, The Incoherence Doctrine: The FTC Strikes Again, A New Antitrust Doctrine, The DOJ Play at Home Game
Move Fast and Regulate Things: Ooops!
Who could possibly have predicted this?
Previous:
Move Fast and Regulate Things: Welcome to the Morning After, Move Fast and Regulate Things (You Don’t Understand), When “Move Fast and Regulate Things” Breaks Down, AI Regulation: Move Fast and Regulate Things, EU Insanity: Regulating Blue Checks, EU Tweets While Ukraine Burns, EU Insanity: AI Regulatory Suicide, EU Insanity: Mistral Edition, The EU Will Continue to Fiddle While Rome Burns
Q2 Platformonomics Repatriation Index™
Our cloud repatriation champions Digital Realty Trust and Equinix reported blow-out Q2 revenues of -1% and +2% respectively, resulting in the Platformonomics Repatriation Index™ hitting a new all-time low (i.e. signs of repatriation grow ever harder to find).
Previous:
ClownWatch™: Digital Realty Trust Q2 Update, Platformonomics ClownWatch™, Cloud Repatriation is Going Just Great: Equinix, New Cloud Repatriation Hypothesis, Cloud Repatriation Where Art Thou?, Cloud Repatriation: The Search Continues, Cloud Repatriation: Still Not a Thing, Platformonomics Repatriation Index™ – Q1 2023: Surf’s Up?
David Boies, IBM and Delta
Pretty sure that is BINGO!
I’m a little surprised David Boies wasn’t disbarred for his work as Theranos’ enforcer.
Private Equity Buys Software Company from Private Equity: Acronis
Hopefully you’ve already migrated!
If you’re not very good at operating software companies, one way to preserve valuations is to sell to another PE company.
