The cloud services of Amazon, Microsoft and Google bet heavily on artificial intelligence, but do their customers want it?

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By Wallace Witkowski

The survey finds that artificial intelligence is only the seventh priority for CIOs

“A” followed by “I” may be the two most frequently spoken letters in business this year, but technology isn’t as high a priority as you might think when it comes to executives who are planning to spend money company for cloud services in the next two years.

Jefferies analyst Brent Thill surveyed information executives at 40 US companies and found that artificial intelligence and machine learning, or AI/ML, didn’t even break their top five priorities when it comes to habits cloud consumption, expectations and planned spending for the next 24 months. Out of nine categories, AI was only the seventh priority for CIOs, falling short of Thill’s expectations, he wrote in a Thursday note.

By cloud spend, Thill means spending on cloud service providers or, as the industry likes to call them, “hyperscalers” – such as Amazon Web Services by Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT) Azure, Google Cloud Platform of Alphabet Inc. (GOOGL)(GOOGL) and Cloud Infrastructure of Oracle Corp. (ORCL). But, as fears of a recession have weighed on them over the past year, businesses have been especially cautious about their spending.

Security, price and applications top the list for CIOs, Thill said. With the “overwhelming majority” of CIOs expecting to increase IT budgets in 2023 and 2024, Thill said AWS looks to be best positioned in the cloud space over the next 24 months.

“Amazon remains the de facto cloud provider, but Azure doesn’t seem far behind,” Thill said, noting that 48 percent of CIOs surveyed reported that AWS was their top cloud provider, while 43 percent said Azure, the 8% GCP and 3% said Oracle.

In the second half of 2023, hyperscalers are expected to drive sales of chips made by companies such as Nvidia Corp. (NVDA), Advanced Micro Devices Inc. (AMD), and Intel Corp. (INTC) to build data centers to house huge workloads AI. As a result of the AI ​​hype, shares of Nvidia are up 215% this year alone, while shares of AMD are up 79%, leading to gains for the PHLX Semiconductor Index, which is up 50% this year .

Read: AMD, Nvidia face ‘tight’ budgets from cloud providers even as AI grows

In addition, Microsoft has invested billions in OpenAI’s ChatGPT, while Google also offers Bard generative AI products and Google Cloud enterprise offerings, and Amazon offers free machine learning tools for users

For those CIOs prioritizing AI, however, Thill said Google Cloud Platform appears to be the vendor of choice, as AI/ML and analytics databases were the top reasons given by those CIOs planning to increase spending.

Read: Nvidia CEO expects AI revenue to grow from ‘small, tiny, tiny’ to ‘pretty big’ over next 12 months

Thill has buy ratings on Amazon, Microsoft and Alphabet, but for cloud services over the next two years, AWS is ahead overall. However, many businesses use more than one cloud service provider. Of respondents, 53% said they expect to increase their spending on AWS, compared to 40% who said they expect to increase their spending on Azure and 15% who plan to increase spending on Google Cloud.

“Encouragingly, we note that the gap between those planning to increase spending and those planning to reduce spending was even higher for AWS, indicating that organizations are sticking to the de facto cloud option as they continue to lean into their digital transformation” Thill wrote.

Amazon shares are up 59.9% for the year, while Microsoft shares are up 42.9%, both Alphabet share classes are up about 41%, and Oracle shares are up 43.7%. %.

By comparison, for the year, the tech-heavy Nasdaq Composite index was up 35.1%, the Dow Jones Industrial Average, with Microsoft among its 30 constituents, was up 3.8% and the S&P 500 advanced 17.5%.

– Wallace Witkowski

This content was created by MarketWatch, operated by Dow Jones & Co. MarketWatch is independently published by Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

15-07-23 1043ET

Copyright (c) 2023 Dow Jones & Company, Inc.

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