(Preview) Microsoft’s Plan for Platform Survival, Meta and the Market’s Permission, A Lack of Situational Awareness

**Andrew Sharp** (0:00)
Hello, and welcome to a free preview of Sharp Tech. Hello, and welcome back to...

**Ben Thompson** (0:13)
We are in person, this is Sharp Tech. Welcome back to Sharp Tech. When I get the Zoom open, or Riverside open, cracks me up every time.

**Andrew Sharp** (0:23)
Live and in person. I'm good. It's great to be in Madison. It's ball me outside relative to what it was in January. And we're here for some company meetings. There's an AI show and tell that we have planned that I'm already pretty stressed out about.

**Ben Thompson** (0:40)
Because you have no AI in your life. Are you going to demonstrate looking up NBA stats?

**Andrew Sharp** (0:45)
Yeah, demonstrate copy editing, Sharp text posts and whatnot. You guys are on a whole other level. We're also going to a Brewers game later today, which I'm very excited about. It will be my first baseball game in probably five or six years. So here we are.

**Ben Thompson** (1:00)
Well, you just asked me, are we going to tailgate? And I was just flabbergasted.

**Andrew Sharp** (1:04)
A total noob East Coast elite question. Of course we'll be tailgating.

**Ben Thompson** (1:10)
We were talking about tailgating on Sharp Tech or on dithering. And I was expressing how East Gators say they tailgate. And I find it very sort of underwhelming. Something in DC that don't even bother.

**Andrew Sharp** (1:20)
Don't even bother, just show up at game time, absolutely. Well, for now, before the tailgate, we are going to review Big Tech Earnings, which came down last week. And we're going to start with two companies that are encountering very different reactions from the market. First up is Microsoft. The market is very happy with Microsoft. The company was up 15% and added $450 billion in value in a single day last week. Biggest single day jump in market history, according to Bloomberg. And Microsoft, they are not pushing toward the frontier whatsoever at this point. They haven't been since 2024
What do you think of what they're doing instead?

**Ben Thompson** (2:04)
If you zoom out, I knew earnings would be last week.
I would come back, have all these to sort of digest. And I think all three updates this week were actually interconnected. I argue we should have done like one big post trying to turn it all together. An omnibus, okay. But I was trying to look at every different hyperscaler is slightly different in where they are in terms of, do they have a cloud business? Like, you know, where are they at relative to the frontier?
What's their focus there? And what is their overall threat from AI? So the one I didn't get into as much as I wanted to is Amazon. We're going to get to them in a little bit. But Amazon's on one extreme. They have a total cloud business. And I think their core business is not very threatened by AI. Yeah. Like the AI is not delivering my packages.

**Andrew Sharp** (2:59)
Durable physical infrastructure for Amazon.

**Ben Thompson** (3:02)
Is a good place to be. Yes. So I think Amazon's like their core business, their e-commerce business, I think is fine, arguably better than ever.
And their cloud business, they're obviously doing very well.
And Amazon is also a company that is more accustomed to okay with tighter margins, which I think is one of the concern about hyperscalers in the long run. Once compute is finally everywhere, who are margins going to compress? They've always thought about having more cost structures. Right. We talked about that last episode. So Amazon is one extreme. Then you have Microsoft who is taking a strategy that's similar to Amazon in some respects, particularly in the fact they're not on the frontier. They're building their own models, but they're not building models that are going to be as good as the models from OpenAI or from Anthropic. But they're serving those models.

**Andrew Sharp** (3:57)
And they got off that train a couple years ago.

**Ben Thompson** (3:59)
They weren't really on that train. Because when they're on the train to the extent that they were supporting OpenAI, but then what happened, the way to think about what happened to Microsoft and OpenAI, Microsoft is like to OpenAI, will keep your inference business. So the business where it's actually customers using your models, your training business, you got to go find someone else. And so that was the whole shift to talking to Oracle, to talking to SoftBank, building these mega data centers.
And yeah, that's the train that they sort of got off of. Their software business is, I think, very threatened by AI. I mean, we're going to talk about vibe coding a little bit. This will be part of AI show and tell, but we are not representative of the large enterprise, to say the least. And there's an aspect of us experimenting with AI, astrotechery is important to just understand the product. But in a very tangible example, we were mostly still using Teams for one specific use case, which was podcast workflows. We're totally off. We made our own software.