alt Hacker NewsThat whole “sell shovels” thing never really made sense, even in the pre-GPU hyperscaler days. BTW, the shovel is GPU (owned by NVidia for now).
AWS, Azure, GCP weren’t just renting servers. They built whole platforms - databases, ML stacks, dev tools, security. Way more than shovels.
The moat was owning the stack. MS used Azure to power Office and now Copilot. Google used infra to juice Search, YouTube, Ads. Even Amazon used it for retail + Alexa. They were mining gold and selling shovels.
And raw compute was never where the money was. Renting VMs was the cheap layer. The profits came from all the higher level services built on top.
Now with AI it’s even more obvious:
Models drive the workloads. OpenAI/Anthropic/DeepMind aren’t just customers, they’re shaping the infra itself. Whoever owns the models sets the rules.
No models = no moat. If AWS isn’t building frontier models, it’s just reselling Nvidia GPUs while MS + Google wrap their clouds around first party models + SDKs. That pulls customers deeper into their stacks, not Amazon’s.
Falling behind compounds. Training/deploying models forces infra breakthroughs (chips, compilers, scaling). If AWS isn’t in that game, they’ll eventually struggle to even run other ppl’s models as well as rivals.
So if Amazon “sits this one out,” it’s not just losing bragging rights. It’s giving up control of the future of compute.
Replies
I agree with you that the profit comes from higher level services built on top.
But I think you are making it sound like Amazon's moat is that it came up with its own technology behind its services.
A lot of times AWS was just grabbing a bunch of popular open source stuff off the shelf and hosting it (e.g., RDS, EKS, etc). Yes there is some R&D work but almost none of what Amazon has come up with is rooted in their own work.
The value they give you is the hosting, maintenance, and compliance of all these services. If you're paying AWS extra to host your database on RDS or your Kubernetes cluster in EKS, you're generally not paying AWS to come up with a better database than anyone else, you're just paying them to help you manage permissions, backups, replication, and other maintenance/compliance/management issues that a company needs for its internal services.
In other words, Amazon's AI customers don't need Amazon to build models. They just need Amazon to use someone else's models, host them on private enterprise compute that easily ties in to existing infrastructure, RBAC, etc, and make everything compliant and easy to maintain. A whole lot of the value is being able to answer audits with "AWS handles our database backups/data security/etc" rather than saying "we have a great ops team and here's all our proof that we handle our database backups/data security/etc properly."
I think it's actually explicitly Amazon's job to sit this one out, especially since they never successfully made a good business or consumer ecosystem device like a smartphone or PC operating system.
Are modals the future of compute?
I’m not 100% convinced this is true. Additionally, I’m not convinced that a waiting pattern right now sets Amazon up for a point of no return. It seems plausible for Amazon to pull an Apple here, to wait until technology is more mature and use their unique position to provide a quality offering.