Comment by podgietaru
2 days ago
I mean, on your Cloud point I think AWS' moat might arguably be a set of deep integrations between services, and friendly API's that allow developers to quickly integrate and iterate.
If AWS' was still just EC2, and S3 then I would argue they had very little moat indeed.
Now, when it comes to Generative AI models, we will need to see where the dust settles. But open-weight alternatives have shown that you can get a decent level of performance on consumer grade hardware.
Training AI is absolutely a task that needs deep pockets, and heavy scale. If we settle into a world where improvements are iterative, the tooling is largely interoperable... Then OpenAI are going to have to start finding ways of making money that are not providing API access to a model. They will have to build a moat. And that moat may well be a deep set of integrations, and an ecosystem that makes moving away hard, as it arguably is with the cloud.
EC2 and S3 moat comes from extreme economies of scale. Only Google and Microsoft can compete. You would never be able to achieve S3 profitability because you are not going to get same hardware deals, same peering agreements, same data center optimization advantages. On top of that there is extremely optimized software stack (S3 runs at ~98% utilization, capacity deployed just couple weeks in advance, i.e. if they don’t install new storage, they will run out of capacity in a month).
> S3 runs at ~98% utilization
I'm geniuinely curious, source?
I wouldn't call it a moat. A moat is more about switching costs rather than quality differentiation. You have a moat when your customers don't want to switch to a competitor despite that competitor having a superior product at a better price.