Everyone is talking about Andy Jassy’s “Return to Office” demand in terms of employees and morale.
The real story is more prosaic, a cash crunch hitting all the Cloud Czars.
You know who they are. Amazon.com, Alphabet, Microsoft, Apple, and Meta. They invested their cash flow to build today’s cloud infrastructure. As a result, they dominate the global economy outside China. As a corollary, America dominates the global economy outside China.
But Nvidia changed the game. Nvidia chips ain’t cheap. Nvidia chips are also energy hogs. You’ve got to buy Nvidia chips to win AI, so the Cloud Czars are paying up. After all, if they don’t pay over-market prices for Nvidia chips, Jensen Huang will sell to someone else.
That’s a serious threat. A single rack of Nvidia chips, liquid cooled by Super Micro or Dell, placed inside a data center like those of Equinix or Digital Realty, makes anyone a Cloud Czar. Broadcom CEO Hock Tan is claiming that “private cloud” now costs less than “public cloud,” and it sort of does because even the Clouds carry technology debt. They’ve still got a lot of 5, 7, and 9 year old chips in their data centers. Inefficiency is technology debt, and if you buy a new rack of super-fast GPUs (with some CPU boards to handle the traffic load) you can get the same power for the same money and maintain control over your infrastructure.
That’s what is going to happen. As Oprah might say, “Everybody gets a Cloud.” It’s Moore’s Law in action.
Protect the Cash Flow
What do you do? You protect your cash flow. You cut everything you can. Forget the five-star lunches in Google land. Get your ass into the cube farm and like what we’re paying you. They get away with it because of tech’s dirty little secret of the last two years, massive layoffs. If you’re not an “AI Expert,” which a few years ago was as remote from money as being a classics major, your job is at risk.
This is happening with all the Cloud Czars. It’s why Meta did its “year of efficiency,” and hasn’t brought those people back. It is why Apple pretended its new iPhone is going to be AI (it isn’t). This is also why Alphabet has been laying off people and cutting perks. It’s why Microsoft is offloading more than half its vaunted “AI Fund” to Blackrock. It doesn’t have the dosh.
All that money is going to Nvidia.
Jassy doesn’t mind losing people, even good people. He doesn’t care that everyone who stays after January is taking a huge pay cut, 20% for the commute and the clothes, 20% for having someone take care of the kids. Never pretend that the boss cares about you. He doesn’t.
And what’s Amazon’s cash flow going to? Keeping Jeff Bezos in jets and yachts? That dude is the worst advertisement for ultra-wealth this side of Elon Musk. Instead of seeing his money as a responsibility, he sees it as an opportunity for self-indulgence. That’s what Amazon programmers are going to suffer for?
The Blowback
The blowback from Jassy’s stupidity is just beginning. The winds that formerly blew from the political right are going to blow from the left soon. But the bigger impact will be on Amazon’s stock price. Because ultimately you can’t cut costs enough to keep the cash flow up, not without some huge gains in revenue. AI revenue gains, when seen against cloud balance sheets, aren’t cutting it.
The only good news here, for Amazon shareholders, is that Jassy realizes he’s losing the race against time.
