Cloud Growth Driven by AI Rises with Unprofitable Foundations

Ed Zitron, CEO of EZ Primary Research, has sounded a warning about the growth of cloud computing driven by artificial intelligence. According to Zitron, this growth is heavily reliant on two unprofitable companies: OpenAI and Anthropic. These companies account for a significant share of revenue at Google Cloud, Microsoft, and AWS.

Zitron argues that this concentration poses sustainability risks, comparing it to the Enron scandal. He highlights OpenAI's significant losses and delayed initial public offering as evidence of its unprofitability. Despite strong revenue growth and investment in cloud infrastructure, Zitron cautions that investors should monitor customer disclosures closely.

The hyperscalers are continuing heavy capital spending through 2027, which could exacerbate the risks associated with this concentration. While markets remain optimistic, Zitron's warning suggests that investors should exercise caution when considering investments in cloud computing companies.