Chinese hyperscalers turning corner as public cloud sector prepares for AI push, while NVIDIA lurks as potential entrant
Things are starting to get rolling, but a number of developments coming out of late 2024 shaped our coverage in the recent week.
Earnings season for the sector is increasingly longer as more public companies overlap the sector from the energy and cryptocurrency worlds, with global markets also home to more listed infrastructure companies. Webscale cloud provider IONOS, based in Germany, reported its nine-month results, which showed steady progress, while Oracle Cloud and Alibaba Cloud follow slightly different fiscal schedules, and reported late into last year. Oracle Cloud showed meaningful uptick in its healthy growth rate and Alibaba Cloud showed for the second consecutive quarter that it looks to be rebounding from the lows of the last few years. Alibaba Cloud is seeing demand for AI tools and GPU-based infrastructure and Tencent Cloud disclosed similar demand dynamics on its recent earnings call.
The Chinese clouds are looking to get back on track and there is no shortage of growth opportunities. Emerging market across Southeast Asia continue to grow and expand and both Tencent and Alibaba Cloud won significant business with GoTo Group in Indonesia. Indonesia is a market in Southeast Asia with both US and Chinese hyperscale cloud presence, driving the pipeline of colocation demand. Against this backdrop, Tencent Cloud recently confirmed that it would be investing $500m through 2030 in Jakarta to build a third AZ, while Alibaba Cloud further cut pricing for AI tools and services as it looks to encourage and push wider adoption. Both Alibaba Cloud and Tencent Cloud are also increasing CapEx steadily in the face of demand.
The public cloud market is rapidly evolving amid this emerging inflection point around AI. In time, as we discussed last week, we are likely to see NVIDIA as a hyperscaler directly delivering infrastructure services to end users. AWS is clearly aware of the long-term changes coming to the landscape and coming out of its annual re:Invent conference, recently rolled out a barrage of new products and services that provide clues as to how it is going to tackle the AI world. As we discuss at length, AWS is zeroing in on price-performance ratios, UI and global scope and scale for both network and compute and storage infrastructure.
The past several weeks have also seen steady strategic activity. There were a few transactions of note, with HMC Capital acquiring Australia’s iSeek and Equinix purchasing BT Ireland’s data centre business. Meanwhile, capital continues to flow into the sector to support growth and expansion. Vantage Data Centers EMEA secured €1.4b, and another of the new GPU cloud providers in Europe – Nscale – raised $155m in a Series A round. And on the energy side, Bloom Energy raised capital to support its project development efforts.
We mentioned last week that we will be opening registration for infra / STRUCTURE in Las Vegas in early February (targeting February 3, 2025) after the sector gathers in Hawaii for PTC. We will have a full team at PTC and if you are keen to meet, let us know. We still have a few spots left on our calendars. And for those in New York, we have opened up registration for Structure Invest in New York, which will be held on May 1, 2025. Please note this event is prioritized for clients, finance and real estate professionals. If you have questions, please do note hesitate to reach out.
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