Wall Street’s Revenue Round-Trip: AI Deals by Cloud Giants Spark Concern

The Wall Street bigwigs are buzzing with concern over the soaring cloud revenue numbers of tech giants, suspecting that the growth might not all be as organic as it seems. The root of this unease lies in what’s being dubbed as “Revenue round tripping,” a sneaky little maneuver that involves big tech companies pouring funds into AI startups, only to have these startups circle that money right back by purchasing cloud and AI services from the very same companies. It’s a bit like a financial boomerang, where the investments return in the form of cloud spending, painting a picture of inflated growth through these startup alliances.

Amazon Web Services, Google, Microsoft, and even Oracle have all dipped their toes in these murky waters, with multi-billion-dollar investments in AI startups swiftly followed by cozy cloud service partnerships. Remember when AWS splurged $4 billion on Anthropic and then Anthropic conveniently crowned AWS as its “Primary cloud provider”? Well, that’s just one piece of the puzzle. Analysts and investors were quick to raise red flags, questioning if the revenue numbers of these cloud behemoths truly reflect the training services rendered to these startups. The murkiness of these dealings threatens to cloud the rosy narrative of a broad-based recovery in cloud workloads.

While the tech titans engage in these financial acrobatics, the overall cloud spending growth has hit a speed bump as companies tighten their belts in the face of economic uncertainty and inflation. If a chunk of this apparent recovery is indeed propped up by these round-tripping deals, the future of cloud revenue might not be as bright as it appears on the surface. However, amidst the skepticism, Microsoft stands out as a potential exception. The company recently made it clear that it doesn’t count any revenue from OpenAI training its GPT models on Azure’s cloud infrastructure, offering a glimmer of transparency in an otherwise murky scenario.

As the saga of revenue round tripping unfolds, the industry watchdogs remain vigilant, dissecting every financial move to separate the genuine growth from the smoke and mirrors. The tech world, known for its innovation and disruption, now finds itself under the harsh spotlight of scrutiny, with stakeholders demanding clarity and transparency in financial dealings. The future of cloud revenue hangs in the balance, with the specter of artificially inflated numbers casting a shadow over the industry’s trajectory. Only time will tell how this tale of tech, AI startups, and cloud revenue manipulation will unfold in the ever-evolving landscape of the digital realm.