In internal documents, Amazon warned that AI startups are delaying spending on AWS

"Internal documents obtained by Business Insider reveal that AWS has flagged a "fundamental" shift in how startups are allocating their cloud budgets. Increasingly, they're delaying AWS cloud adoption and diverting spending toward AI models, inference, and AI developer tools. Instead of pouring money into traditional cloud services like compute and storage, these companies are spreading costs across newer AI technologies that are easier to switch between, according to the documents."

"This suggests a seismic shift is happening in the cloud industry. AWS's dominance was built on startups that embraced its affordable, scalable computing services as an alternative to running their own data centers. But the generative AI boom has ushered in a new era, a " Cloud 2.0" stack of specialized hardware, software, and tools. As startups use these new AI offerings first, and wait longer to spend on AWS, the cloud giant's once-firm grip on this lucrative ecosystem could begin to loosen."

Startups are increasingly delaying adoption of Amazon Web Services and reallocating early cloud budgets toward AI models, inference, and AI developer tools. Spending is shifting away from traditional compute and storage toward specialized AI technologies that are easier for companies to switch between. A new 'Cloud 2.0' stack of dedicated hardware, software, and tools is attracting early-stage IT spend. Startups often adopt AWS at later stages, relying on AWS services once core AI infrastructure and tooling are in place. The changing allocation of budgets could weaken AWS's early-stage dominance while still preserving its role for later-stage cloud needs.

Read at Business Insider