Chip scarcity gave AI clouds room to compete

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 39:17

   Why didn't the hyperscalers move into this market faster or win this market more convincingly early on, in this first chapter at least? First of all, sometimes there is an ocean that they didn't even try. Like, there is a solid, like, solid amount of business that hyperscalers get from out of this market. Like, huge deals, they are very competitive. Sometimes people say, oh, have you seen AWS prices?

2. 39:45

   Well, these are public prices. I assure you, like, for proper deals, they are doing proper prices and they're very competitive and, like, they're very aware of the market. I think, in a sense, like, there are two angles to that. First, like what I've mentioned before, a lot of these companies need to juggle like their internal consumption and what they can put for like for the broad market. And there is like we are in cheap shortage world, right? So like if NVIDIA could have bought, like could have produced like 10x the chips, probably this whole market would have be shaped differently because they were like Microsoft's and Google's of the world would both buy capacity for themselves and for the broader market to operate. This was part, like simply not enough capacity for their scale, right? Because there is not enough

3. 40:42

   capacity for their scale, this is a relatively small business for them. AWS revenue is what, like 100 billion or something? I mean, like a business for $2, $3, $4 billion, it's not insignificant by any margin. But compared to what their conservative, large-scale, established businesses, it's not that easy either. But your point is basically they get a chip allocation that is not as large as they'd want. They have to use a large amount of that for training themselves. There's only so big that the cloud business can be, given all that.

4. 41:23

   And yeah, it's interesting to figure out how to prioritize. Do you go after the few folks with large contracts or do you try and get this mid-market enterprise up-and-coming segment? But I guess you're kind of doomed either way if you only have a certain number of chips. Yes, exactly. And then at the same time, this becomes a relatively small part of your revenue portfolio and you're like, do I even need to allocate resources to that?

5. 41:49

   And that is especially a pressing question because, like, for the hyperscalers, it's not just a matter of, like, sales. It's also a matter of changing their infrastructure that was built at scale for other kinds of workloads. The networking, the, like, throughput performance, the storage performance, by the way, right, that I've mentioned earlier. So this requires, if you want to have it universally implemented through the whole stack, this is a massive investment on their part that needs to be justified by the size of a potential business.

6. 42:31

   And it's not that there yet. I think if we start getting out of this cheap shortage in, I don't know, two, three, five years, maybe, we will definitely see this shift. and they will pay more attention because this will become like increasing a large chunk of business and they will start investing. They will like reorganize and redesign their like internals to be more accommodating to these demands, et cetera, et cetera, et cetera.

7. 43:03

   And then with their whole sales power, they'll go and try to win this market. And the question is whether the novel players like us, for example, will be fast enough to grow and represent like significant competition when they get there. I'm like, I'm 100% sure that they will pay more attention in the future. Yeah. Our bet is that we'll be fast enough to be in the league with them and fight as equals rather than a small player trying to run in their trails.

8. 43:39

   Makes sense. I mean, what do you think happens to like,