Investors love AI, as long as you’re a cloud host

Core Impact Points

• Amazon's cloud revenue rose 37% year over year, with AWS revenue clocking $42 billion for the quarter.
• Investors are treating cloud hosts as the most reliable part of the AI stack, while remaining skeptical about the underlying economics for AI labs and AI startups.
• Amazon's hosting revenue is someone else's AI bill, and if demand for AI doesn't hold up, it's going to be a bad time for everyone.
• The company is making serious long-term bets on chips like the Trainium TPU and the Arm-based Graviton processor, which can meaningfully improve margins for the company's cloud business.
• Amazon's AI play isn't limited to building large data centers, and the company is also investing in AI research and development.
• The trend of investors favoring cloud hosts over AI labs and startups has implications for the US market, economy, and consumers, as it may lead to a shift in the way AI is developed and deployed.