Banking crisis leaves cloud giants unharmed

Pictured: Scott Raynovich, Founder and Principal Analyst with Futuriom


The current banking crisis has left cloud hyperscalers like Amazon and Google largely unaffected thanks to their strong balance sheets, a major industry analyst has concluded.


The failure of tech institution SVB Financial and the rescue of Swiss bank Credit Suisse through a partnership between the Swiss National Bank and UBS has sent shock waves through much of the technology sector and rocked the global economy. A number of other regional US banks appear to be in difficulties too with federal banking officials scrambling to contain the damage.


But, as noted by Scott Raynovich, Founder and Principal Analyst with Futuriom, cloud stocks have counterintuitively been rallying in response: “In the past week, Amazon shares are up about 7%, Microsoft has rallied about 8%, Google is up 10%, and Apple is up 7%,” he noted. “Some brand-name chip companies are still riding the artificial intelligence boom, despite the banking crisis. Shares of NVIDIA are up 77% year-to-date, for example. Arista Networks recently hit an all-time high, attributable partially to cloud gains as well as its potential for networking AI applications.”


He also observed that large tech companies such as Amazon, Facebook, and Microsoft have been trimming expenses and announcing reorganizations in the face of slowing growth, indicating to investors that they will be watching costs: “This typically pleases investors, although not those that have been laid off,” he concluded. “This could further boost profitability in the future.”


His explanation for the health of the cloud tech sector comes down to money: “The current banking crisis is concentrated in a few banks that had to take losses on treasury portfolios, which suffered as they stuffed their balance sheets with deposits when interest rates were low but then suffered losses as interest rates spiked,” said Raynovich. “Most of the largest and cash-rich tech companies have rock-solid balance sheets with large amounts of cash, so unlike many enterprises, they aren’t over-leveraged in debt and can be a port in the storm. For example, at last count, Microsoft had an astounding $103 billion in cash and short-term investments. The largest tech companies are also massively profitable. Microsoft made $72 billion in profit in 2022, and Google made $60 billion in profit. They are in absolutely no danger.”

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