In December, LinkedIn announced it was pausing its “Blueshift” project, postponing the relocation of its data center technology to Microsoft’s Azure cloud. This decision is a significant reversal for LinkedIn, which initially announced the Blueshift plan in 2019, three years after Microsoft’s $27 billion acquisition of the business social networking company. Microsoft, led by CEO Satya Nadella, has been leveraging Azure for substantial growth in the competitive cloud infrastructure market and has already migrated other Microsoft acquisitions like GitHub and Minecraft developer Mojang to Azure, making this pause a notable one.
The pause in the move to Azure was attributed to challenges arising from LinkedIn’s desire to use its proprietary software tools instead of readily available Azure options. Despite the change in direction, however, LinkedIn will continue to use some Azure cloud services.
Microsoft, aiming to compete with Amazon Web Services, has been banking on cloud technology for growth. The delay in moving LinkedIn to Azure underscores the complexities in executing large-scale cloud migration projects.1
However, once LinkedIn does move to Azure, it may benefit from a breakthrough storage technology being pioneered by Microsoft that holds the promise of rendering ransomware attacks on cloud-stored data virtually impossible.
In December, Microsoft unveiled details of its ground-breaking glass-based data storage, known as Project Silica, at the 29th ACM Symposium on Operating Systems Principles. The research paper from Microsoft introduces the first cloud storage system leveraging quartz glass—an exceptionally durable medium enabling indefinite data retention.
Silica’s chief innovation is using ultrafast lasers to etch data into square glass platters in layers, offering a highly efficient archival solution. To read stored data, machine learning is employed to decode microscopic analog signals scanned from the glass back into digital data. With applications spanning finance, scientific research, and healthcare, Silica’s secure archival glass storage could fortify organizations against ransomware threats.
Microsoft is actively configuring the physical library for glass storage based only on its own Azure cloud usage patterns, meaning that when the tech is ready, only Azure customers are likely to benefit.2
Google has unveiled its most powerful AI model, Gemini, available in three versions: Gemini Ultra, Gemini Pro, and Gemini Nano. The company plans to license Gemini to customers viaGoogle Cloud for use in applications and roll it out to Google AI products like Bard chatbot and its forthcoming Search Generative Experience.
Gemini’s release includes Gemini Ultra as the largest, most capable category, Gemini Pro for versatile tasks, and Gemini Nano for individual tasks and for use on mobile devices, including Android development. Licensing starts on Dec. 13, with developers accessing Gemini Pro through the Gemini API in Google AI Studio or Google Cloud Vertex AI.
Also in December, Google introduced its TPU v5p chip for AI model training, claiming improved performance over TPU v4. This chip release follows recent custom presentations of similar chips by cloud rivals Amazon and Microsoft.3
In December, Oracle announced its Q2 results. While earnings per share slightly exceeded expectations, a number of other metrics fell short of forecast. Despite the miss, there were positive highlights: year-over-year revenue growth of 5%, a 44% increase in net income to $2.5 billion, and earnings of 89 cents per share, up from 63 cents a share the previous year.
Cloud infrastructure revenue surged 52% to $1.6 billion, with notable clients including xAI, Halliburton, and Samsung. However, challenges arose in meeting demand, particularly from Elon Musk’s AI startup, due to shortages in graphics processing units. Oracle’s CEO, Safra Catz,acknowledged a capacity constraint but highlighted the strategic decision to recognize revenue promptly.
Amidst the quarter’s setbacks, Oracle secured cloud business from Microsoft and expanded its database software availability on Microsoft’s Azure public cloud. Oracle projects Oracle Cloud Infrastructure (its answer to Microsoft Azure and AWS) will see growth of more than 50% over the next several years. And Oracle also provided guidance for the fiscal Q3, projecting 6-8% revenue growth.
Despite missed estimates in Q2, Oracle’s shares have risen by 41% in 2023, outperforming the S&P 500’s 20% gain.4
Investing in Cloud Computing with DATA ETF
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Portfolio Strategy and Activity
For the month, Intuit Inc made the largest contribution to the Fund, followed by Salesforce Incand Alphabet Inc. The largest detractors to performance for the month were Oracle Corp, followed by Sap SE and Microsoft Corp.
1. Novet, J., “LinkedIn shelved planned move to Microsoft Azure, opting to keep physical data centers,” CNBC, December 14, 2023; https://www.cnbc.com/2023/12/14/linkedin-shelved-plan-to-migrate-to-microsoft-azure-cloud.html
2. Afifi-Sabet, K., “Microsoft inches closer to glass storage breakthrough that could finally make ransomware attacks impossible in the data center and hyperscalers — but only Azure customers will benefit from it,” TechRadar, December 06, 2023; https://www.techradar.com/pro/microsoft-inches-closer-to-glass-storage-breakthrough-that-could-finally-make-ransomware-attacks-impossible-in-the-data-center-and-hyperscalers-but-only-azure-customers-will-benefit-from-it
3. Elias, J., “Google launches its largest and ‘most capable’ AI model, Gemini,” CNBC, December 6, 2023; https://www.cnbc.com/2023/12/06/google-launches-its-largest-and-most-capable-ai-model-gemini.html
4. Novet, J., “Oracle shares slide as revenue misses estimates,” CNBC, December 12, 2023; https://www.cnbc.com/2023/12/11/oracle-orcl-q2-earnings-report-2024.html