AI is going to transform how we think about software and shape the future of cloud spending. Microsoft's earnings call last night was case in point: At current growth rates, the Intelligent Cloud segment (+25% y/y) is on track to be larger than Productivity Software (+14% y/y) in the next few quarters. We just published a blog that dives into what's causing this shift and where its going 👇

With AI, intelligence is being digitized. Models are getting smarter and more capable, while at the same time, costs are falling 98%+ per year in some cases.

The result is an explosion in demand for tokens (and compute), echoed by the hyperscalers and AI-native startups alike. AI-native developer tools are one of the fastest growing categories of software ever created, with several 10x'ing their run rate revenue in less than a year.

Ultimately, we think AI transforms both how software is created and, more importantly, the impact that software can have within our work and personal lives. The result is an explosion in productivity, with strong incentives to invest in AI or risk being left behind. We think the platforms that enable this transition are best positioned, and will continue to gain share of global software spend.

While pessimists assume a large part of the workforce will be wiped out from AI, we take a different view that productivity gains from AI will lead to more investment and more opportunity. AI will offset future labor demand, and that offset will flow into software investment ($7 trillion is our midpoint 2030 assumption). Rather than 20% unemployment, we think its more likely we see a reduction in average working hours of 20%. Same drop in labor hours, but much more optimistic for humanity (and historically consistent with innovation of the past).

Lots of nuance of course in this analysis, and things are changing rapidly. Dig into the blog for more details: