Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), and Microsoft (NASDAQ: MSFT) are the world's three biggest cloud computing providers. They are spending a ton of money on adding more computing capacity this year, with Amazon leading the way, on track to spend $220 billion, Alphabet expecting to spend about $200 billion, and Microsoft forecasting spending of $175 billion. Added up, that's $595 billion.
That's a huge amount of money being spent on data centers, which showcases just how important the cloud business is to these three. However, all of that money has to go somewhere, and I think there's one clear winner from that spending that investors can point to. This Rare Signal Is Flashing Again.
In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » The cloud computing infrastructure space is experiencing surging revenues due to the artificial intelligence (AI) trend, as most companies lack the in-house computing capacity to run their AI models and applications.
Instead, they turn to cloud computing providers such as Amazon Web Services (AWS), Microsoft Azure, or Google Cloud to handle those demands. This works well for both parties in the transaction; cloud providers generate income from leasing their computing assets, while their clients stay asset-light and don't have to worry about maintaining complex data centers. Demand for cloud computing has exploded in the past few years, and the providers don't have nearly enough capacity to meet it.
During Amazon's last conference call, CEO Andy Jassy said that there will not be enough capacity available to meet demand in 2026, and asserted that 2027 is shaping up to be the same way. As a result, contracts for capacity that won't be available until 2028 are already starting to appear. Considering the massive backlogs of cloud business that Google Cloud and Azure have, this likely applies to them, too.
All three cloud computing divisions put up incredible revenue growth rates in the past quarter, with Google Cloud rising 82%, Azure increasing 43%, and AWS rising 37%. Growth rates like that warrant major reinvestment, which is why the companies are spending nearly $600 billion combined in capital expenditures this year. So, what company benefits the most from this?
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