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Comment by Animats | Hacker News Reader

"Unlike the CPU cloud, which became an oligopoly, new entrants building dedicated AI clouds continue to flood the market. Without a monopoly or oligopoly, high fixed cost + low marginal cost businesses almost always see prices competed down to marginal cost (e.g., airlines)."

So why aren't there more entrants in the CPU cloud area? The technology is a commodity. Google and Amazon don't make CPUs.

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The secret sauce in the cloud is not hardware but control plane, networking, and storage software.

And battle-tested SREs

Battle-scarred*

And IP space.

The clouds are buying IPs and there's nothing stopping you from doing the same.

The technology is, but operations isn't. Anyone can start a CPU cloud. Fewer can run it reliably (there are plenty of those at regional level, though). Very few can do it on a global scale, and break through the mindset of Amazon, Google and Microsoft being the only options.

> So why aren't there more entrants in the CPU cloud area?

Because the market is saturated with players.

AWS, Azure, GCP, Alibaba, IBM Cloud, Digital Ocean, Tencent, Oracle Cloud, Huawei Cloud, that Dell/VMware thing, Linode/Akamai, HP, Scaleway, Vultr, GoDaddy, OVH, Hetzner, etc.

So are margins low?

Margins are high. 30-80%

Source: I run a cloud company and have plenty of friends in the space.

Software engineers are shockingly dumb when it comes to infra costs and will quickly push the technology arm of a company to jam everything in the cloud because it’s more convenient for them.

It’s not shocking at all that margins are that high when a team pushes to pay AWS $40k a month for a static workload that could run on two racks of servers.

“Dumb” could be reworded ;)

I would say “irrational when it comes to costs”. Not all developers ask questions such as:

Does paying 10K for convenience save me and my team more than 10k worth of time? Does this vendor make it easy to migrate out?

Of course I’m biased, because I like it better when the answers favor us, cloud vendors. But there are no catch all answers; as always, it depends.

Would the Graviton CPUs from Amazon and upcoming Axion from Google not count?

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