In the video below Fool portfolio manager Matt Argersinger and managing editor Eric Bleeker discuss tech events across the past week.
In this segment, the two discuss Google (NASDAQ:GOOGL) getting more aggressive in the cloud computing space. Amazon (NASDAQ:AMZN) has been able to take a commanding lead providing cloud services thanks to aggressive cost cutting in its Amazon Web Services business in recent years. If there is a well-known startup founded across the past half decade, their IT infrastructure is likely deeply reliant on Amazon's cloud services.
Google knows that the future of data centers is in the cloud, and isn't ready to cede the space. It's dropping prices on its cloud computing platform, Google Compute, by dramatic amounts. Depending on the service, prices will drop anywhere from 30% for basic hosting services to 85% for data analysis services.
As Eric and Matt discuss in the video, all signs point to cloud computing prices decreasing at a rate close to Moore's Law. That'll create profitability challenges in the industry, especially for smaller players. Matt specifically cites Rackspace (NYSE:RAX) as a company that's going to be challenged to defend its position as competition increases.
However, much like Intel (NASDAQ:INTC) has been able to generate huge profits for decades competing in the processor space where prices are constantly in free-fall, a company like Amazon can still profit by leveraging services such as it's AWS Marketplace, which is a bit like an app store for the cloud.
To see Matt and Eric's thoughts on the subject, watch the video below.