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One vendor can't eat the market
The 2014 fear
The fear had logic behind it. Enterprise software companies ran as annuities at 85% gross margins, and Amazon could offer those products at something like 8% gross margin. Eight years earlier, when S3 and EC2 launched in 2006 and Bezos laid out why AWS mattered in the 2007 annual letter, investors reacted badly. Ask thirty of the smartest investors of 2007 whether AWS would become a durable business with real margins, and the count of yeses is zero.
What really happened
AWS did run over plenty of companies. Even so, Snowflake competed head-on with Redshift while running on Amazon, and Confluent, Elastic, and Databricks grew up in the same shadow. Datadog faced a competing AWS offering and became a hundred-billion-dollar company. The 2014 view was wrong because Azure and GCP were irrelevant then. By 2026 they are unbelievable businesses, in an oligopoly with a split around 40, 30, and 20, and Cloudflare, a cloud provider of a different sort, is another hundred-billion-dollar company.
Why AI is different
Cloud scaled quickly, and AI is scaling far faster than cloud did. A single company serving all of that demand needs a huge infrastructure buildup: energy, chips, memory, and the algorithms on top. The view that Anthropic is going to do everything runs into that, and the cloud pattern points toward an oligopoly of big winners alongside smaller companies that reach a hundred billion dollars.
Why can few companies run a cloud?
A cloud needs data centers, power contracts, custom networks, and huge fleets of servers, all paid for years before customers fill them. Synergy Research Group's market tracking has long shown Amazon, Microsoft, and Google leading cloud infrastructure. Each new data center region adds fixed cost that only large revenue can cover. Scale then lowers the cost per unit, which reinforces the lead of the largest providers.
How did Snowflake compete while running on AWS?
Snowflake was founded in 2012 and built its data warehouse to separate storage from compute. It ran on AWS, Azure, and Google Cloud, so a customer could use it across clouds. Amazon's Redshift ran only on AWS. Snowflake's 2020 IPO raised about 3.4 billion dollars, the largest software IPO up to that time.
How did S3 and EC2 change startups?
Amazon launched S3 storage in March 2006 and EC2 computing in August of that year. S3 started at 15 cents per gigabyte per month, and EC2 at 10 cents per hour for a small server. A startup could rent capacity by the hour instead of buying servers upfront. Many early web companies, including Dropbox and Airbnb, later built on AWS.
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