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VC Predictions: GenAI Adoption Will Keep Lifting Up Cloud Budgets

December 5, 2023

A year ago, I boldly predicted that “the cloud is still a multibillion-dollar opportunity” in 2023. As it turns out, I was right—but for the wrong reasons. 

What I predicted: When the three largest public cloud vendors—Amazon, Microsoft, and Google—all announced Q3 2022 annual growth of 28% to 42%, I took that as a promising sign that cloud budgets might avoid getting slashed in 2023. 

I went on to predict that “despite the macro concerns we’ve all been living through, overall growth in cloud spending is still robust” and that “the untapped billions in cloud spend could be a silver lining for the year ahead.” 

What actually happened: Many existing cloud projects in 2023 were curtailed or delayed, so I was, well, wrong on that point. 

But cloud spending has been rebounding due to the rise of generative artificial intelligence projects. For example, Bloomberg reported that “Microsoft’s Azure cloud business posted 29% sales growth in the September quarter, faster than analysts estimated, in part because of corporate customers’ interest in new artificial intelligence products.”

To be blunt, public investors have been disappointed to date with the adoption of GenAI. The hoped-for impact of GenAI has largely not quite emerged yet in most larger tech companies’ results, with a few notable exceptions such as Microsoft and Nvidia. 

As a result, almost all of the outperformance of the S&P 500 stock index in 2023 has come from the largest tech players: Microsoft, Nvidia, Alphabet, Amazon, Meta, Apple.  

As 2023 draws to a close, I’ve been wondering: What will be different next year? What might stay the same?

In 2024, my prediction is another strong year for tech, but the breadth will increase: 

  • As GenAI adoption gains momentum, cloud spending will have to keep pace. 
  • A surge in cloud spending will naturally boost the bottom line for public cloud vendors, but I believe we’ll also see more companies’ stocks begin to rally due to positive impacts manifesting from GenAI.  
  • Many companies stand to benefit, including those with proprietary data, solutions that can be improved with enhanced automation, and cost structures that can be improved by incorporating more GenAI.

Whatever transpires in 2024 with GenAI adoption, this year was yet another reminder that innovation and resilience go hand in hand—and opportunities still abound for intrepid changemakers.