SEATTLE / LONDON (IT BOLTWISE) – Amazon Web Services faces a new challenge as AI startups increasingly invest their budgets in specialized AI models and developer tools before relying on traditional cloud services. This shift could threaten AWS’s longstanding dominance in the startup ecosystem.
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Amazon Web Services (AWS) is facing a significant challenge as internal documents reveal a sea change in the spending habits of AI startups. These companies are increasingly investing in specialized AI models and developer tools before considering AWS services. This development could threaten AWS’s longstanding dominance in the startup space as the new technologies introduce a Cloud 2.0 stack that includes specialized hardware and software.
Traditionally, AWS was one of the first and largest spenders for new technology companies that saw its scalable and cost-effective services as an attractive alternative to building their own data centers. But the generative AI revolution has set new priorities. Startups first invest in AI models from vendors like OpenAI and Anthropic, as well as developer platforms like Vercel, before considering AWS services.
AWS’ internal documents prepared by employees of the startup business team show that founders are postponing their decision to use AWS services until a later date. This shift is being driven by how AI startups structure their initial technology spend. Many startups make their first purchases from AI model providers and postpone the decision to use AWS services until they need advanced features such as compliance features and security measures.
AWS’s market shares are under pressure as Google Cloud and Microsoft Azure reported over 30% growth in the second quarter, while AWS only achieved 18% growth. Neocloud service revenue has increased by more than 200% in the past year. Analysis from CB Insights shows that between January 2024 and September 2025, AWS captured 30% of the market for the top 1,100 AI startups, behind Google Cloud at 38% but ahead of Microsoft Azure at 7%.
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