Global cloud service providers will grow capex by an estimated 7.8% YoY in 2023, according to the latest research from Counterpoint’s Cloud Service. Higher debt costs, enterprise spending cuts, and muted cloud revenue growth are impacting infrastructure spend in data centers compared to 2022.
Commenting on the large cloud service providers’ 2023 plans, Senior Research Analyst Akshara Bassi said, “Hyperscalersare increasingly focusing on ramping up their AI infrastructure in data centers to cater to the demand for training proprietary AI models, launching native B2C generative AI user applications, and expanding AIaaS (Artificial Intelligence-as-a-Service) product offerings.”
According to Counterpoint’s estimates, around 35% of the total cloud capex for 2023 is earmarked for IT infrastructure including servers and networking equipment compared to 32% in 2022.
In 2023, Microsoft and Amazon (AWS) will account for 45% of the total capex. US-based hyperscale’s will contribute to 91.9% of the overall global capex in 2023.
Chinese hyperscalers are spending less due to slower growth in cloud revenues amid a weak economy and difficulties in acquiring the latest NVIDIA GPU chips for AI due to US bans. The scaled-down version – A800 of the flagship A100/H100 chips – that NVIDIA has been supplying to Chinese players may also come under the purview of the ban, further reducing access to AI silicon for Chinese hyperscalers.
Based on Counterpoint estimates, Microsoft will spend proportionally the most on AI-related infrastructure with 13.3% of its capex directed towards AI, followed by Google at around 6.8% of its capex. Microsoft has already announced its intention to integrate AI within its existing suite of products.
AI infrastructure can be 10x-30x more expensive than traditional general-purpose data center IT infrastructure.
Though Chinese players are investing a larger portion of their spends towards AI, the amount is significantly less than that of the US counterparts due to a lower overall capex.