Amazon closes the cloud gap with Microsoft and Google
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Amazon closes the cloud gap with Microsoft and Google

Amazon’s cloud hosting business has been a solid outperformer over the last couple of years. But even as it’s dominating the market to deliver computing power online, there is one area in which it has lagged: artificial intelligence (AI). Google and Microsoft were unquestionably the leaders in this area, offering tools that gave customers greater control over the data that all that computing power was working with – now Amazon is working hard to catch up.

Amazon’s share price has risen by 54% so far this year

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SOURCE: Yahoo Finance

Amazon Web Services (AWS), the Ecommerce behemoth’s cloud computing arm, has recently added a number of AI enhancements to its platform, hired a crack team of experts in the field, and signed up big customers like Intuit Inc., a software maker. It’s pumping time, money, and effort, into catching up to Google and Microsoft for a very good reason: AI is likely to fuel growth in cloud computing, and Microsoft and Google are using their AI capabilities as lures to get customers off AWS.

According to researchers at IDC, sales of software used to create AI applications will rise by around 40% by 2021. At that point, they will be worth $8 billion annually. IDC analyst David Schubmehl says that growth for these products in the cloud will be even higher.

Right now, AWS is the cloud computing king. It has a five-to-one lead in market share over Microsoft, which is in the number two spot. But projections for future growth in the industry suggest Amazon’s lack of AI capability (compared to its peers) could hurt it. Hence, they’ve hired experts like Pietro Perona and Stefano Soatta and given them room to run. It seems to be working. Schubmehl says: “Given that they've only been doing this for 11 months, they're doing pretty darn well. AI is now a key component of Amazon's arsenal.”

Disclosure

Dominion holds Amazon in its Global Trends Ecommerce Fund.


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