Why Is the Cloud-Computing King

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I'm not referring to the meaning of life, mind you. I'm talking about the annual list of the Top 500 supercomputers in the world. When you look at that list,'s (Nasdaq: AMZN  ) virtual supercomputer built using its Elastic Compute Cloud, or EC2, ranks No. 42, according to a recent Wired report.

The reason that's such a feat is that Amazon's virtual powerhouse is in the clouds and its raw processing power is decentralized and spread throughout its global network of data centers. This contrasts with the old-school approach of calling up Cray (Nasdaq: CRAY  ) or Penguin Computing and ordering a multimillion-dollar machine, similar to what the feds just ordered sporting NVIDIA (Nasdaq: NVDA  ) and Advanced Micro Devices (NYSE: AMD  ) chips or this one using only ARM Holdings (Nasdaq: ARMH  ) -based NVIDIA chips.

Cycle Computing is a small company that helps researchers and businesses tap into EC2's supercomputing power, and CEO Jason Stowe is naturally a big proponent of cloud-based processing. Stowe believes that while there is still a place to having one's own dedicated supercomputer, those days are numbered as cloud-based supercomputing is able to increasingly satisfy what the market needs.

Amazon provides an option that is more affordable and can handle most things thrown at it. For example, Cycle helped set up a virtual supercomputer running 30,000 cores on EC2 for about $1,279 per hour. That may sound like a lot to the average user, but it's chump change when compared with the alternative a researcher or business would face, which Stowe details:

If you created a 30,000-core cluster in a data center, that would cost you $5 million, $10 million, and you'd have to pick a vendor, buy all the hardware, wait for it to come, rack it, stack it, cable it, and actually get it working. You'd have to wait six months, 12 months before you got it running.

The takeaway is that even though Amazon's solution doesn't top the nosebleed horsepower of the No. 1 supercomputer, Japan's K Computer, which is almost 44 times as fast, it offers what will satisfy what many entities need and does so at a fraction of the monetary and time expenditures.

EC2 sees competition from Microsoft's (Nasdaq: MSFT  ) Azure and Rackspace Hosting (NYSE: RAX  ) , but you also don't see those names within the first 100 spots of the supercomputer list.

It's no wonder Amazon is the cloud-computing king.

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Fool contributor Evan Niu has sold a bullish put spread on NVIDIA. He owns shares of and ARM Holdings, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Microsoft and Motley Fool newsletter services have recommended buying shares of Rackspace Hosting, Microsoft,, and NVIDIA, writing puts in NVIDIA, and creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 29, 2011, at 2:15 AM, AdityaJayaram wrote:

    Cloud Computing is cost efficient and provides computing at a fraction of the cost of traditional computing running clouds on efficient computing infrastructure is key to this efficiency.Just watched an interesting video on cloud computing @

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