AI Is Driving an Uptick in Cloud Computing Demand. Good News for Amazon.

Mizuho analyst James Lee wrote in a research note Friday that his firm recently completed a survey of IT buyers, covering 300 of the Fortune 1,000. And he found surprisingly strong results compared with a similar survey taken one quarter earlier. For that, you can thank AI.

“GenAI is driving the next super cycle of cloud adoption that accelerates mass market migration over the next few years, since the new technology can only be efficiently deployed in the cloud,” he writes. He is particularly bullish about cloud market leader Amazon (ticker: AMZN) given its strong position in AI, and a potential inflection in growth in the third quarter.

The shift in market conditions over the last quarter, at least according to Mizuho’s survey, is remarkable. It found that sales cycles for cloud computing contracts are running close to historical norms, at 30 to 60 days, following much longer times over the last four quarters. He adds that discounts of 30% to 40% last quarter have quickly dissipated due to accelerated use of what had been excess capacity. He also says that cost optimization continues, but that enterprises are reinvesting their savings into Gen AI development.

The analyst thinks cloud adoption could accelerate to 75% of workloads in the next three-to-five years, from 15% currently.

Amazon shares were 1% higher on Friday, Microsoft’s (MSFT) were off 0.6%, and
Alphabet
(GOOGL) was flat.

Write to Eric J. Savitz at [email protected]