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Is AMZN's Chilean Astrodata Plan Bad News for MSFT & GOOGL?

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For Amazon (AMZN - Free Report) , sky isn’t the limit. Reportedly, the Jeff-Bezos-led company is looking to reach into space by storing and mining astrodata from Chile’s giant telescopes.

Chile has 13 observatories and attracts almost 70% of the global astronomy investment, courtesy of the cloudless skies over the northern Atacama, the driest desert on the planet.

According to InvestChile, nearly 40% of the world’s astronomical infrastructure is in the country, a figure that is expected to reach 77% by 2020. Within the next five years, three of the world’s four next generation billion-dollar telescopes will be installed in Chile.

Chilean government recently announced plans to pool data from all its telescopes onto a virtual data observatory stored in the cloud. Moreover, the observatory will enable astronomers, scientists and researchers to access cloud of datasets from centers in Chile, which they can share and analyze.

The government initiative presents significant opportunity for cloud solution providers like Amazon, Alphabet’s (GOOGL - Free Report) Google and Microsoft (MSFT - Free Report) .

What Astrodata Holds for Cloud Providers

Per government estimates, astrodata generated from telescopes in Chile by 2022 will surpass data generated by Facebook (FB - Free Report) and Twitter (TWTR - Free Report) ) or Google and YouTube. Hence, data storage will present a significant challenge for cloud providers as they will be required to build more data centers in the region.

Notably, Research and Markets projects worldwide data center storage market to see a four-year CAGR of 11.83% during the 2018-2022 period. The bountiful prospects bode well for cloud storage providers.

Meanwhile, proper harnessing of this vast database will require complex tools based on artificial intelligence (AI), which these cloud providers have the resources to develop. Additionally, these AI-supported tools can be used to analyze large datasets generated from fields like banking and healthcare.

According to research firm IDC, by 2025, the global datasphere will grow to 163 zettabytes (that is a trillion gigabytes), which is 10 times the 16.1 zettabytes of data generated in 2016. AI-based tools are all-important for harnessing such massive datasets and also help cut down on costs.

Rapid proliferation of AI-based tools is projected to save more than a staggering $1 trillion in costs for financial institutions by 2035, per Bain & Company. Accenture estimates AI to add $1.2 trillion in value to the financial industry in the same time frame. Per ABI Research, AI-based applications will save global healthcare sector an estimated $52 billion by 2021.

Amazon’s Edge Over Google & Microsoft

Amazon already hosts cloud platform for the Hubble Telescope’s data and the International Centre for Radio Astronomy Research in Australia. This domain expertise certainly gives Amazon Web Services (AWS) leverage over Google Cloud and Microsoft Azure to store and mine Chilean astrodata.

Moreover, Amazon is way ahead in the Latin America with offices in Brazil, Chile, Colombia, Argentina and Mexico. The company is aggressively expanding in the region by setting up new data centers, particularly in Chile and Argentina.

Amazon.com, Inc. Price and Consensus

 

Amazon.com, Inc. Price and Consensus | Amazon.com, Inc. Quote

In May, Amazon opened a new AWS office in Buenos Aires, Argentina, which will aid in promoting the utilization and innovation of cloud-based technologies.

However, Google is a little way away as it already is a member of Chile’s Large Synoptic Survey Telescope (LSST), which will be fully operational in Cerro Pachon in 2022. The company is also operating a data center in the country.

Google has three availability zones in the region with Sao Paulo, Brazil, being the latest addition. Per Reuters, the company is set to announce expansion plans for its Chilean data center on Sep 12. Google’s parent company, Alphabet currently has a Zacks Rank #3 (Hold). 

Alphabet Inc. Price and Consensus

 

Alphabet Inc. Price and Consensus | Alphabet Inc. Quote

Meanwhile, Microsoft, another Zacks Rank #3 stock, apparently hasn’t shown any interest in Chilean astrodata. Notably, Microsoft Azure provides cloud facilities to Latina America through its data center in Brazil. It also has an availability zone in the country.

AWS Global Expansion: Key Catalyst

Per Synergy Research, AWS continues to dominate the cloud system infrastructure services with 34% market share in the second quarter. However, Microsoft Azure, Google and Alibaba (BABA - Free Report) grew much faster.

AWS currently operates 55 availability zones across 18 geographic regions globally. This figure is higher than Google Cloud’s 46 availability zones in 15 regions.

However, Microsoft Azure’s total number of available regions is 40 in 140 countries, which is a big number. Further, the company is planning to set up 10 more regions worldwide.

Microsoft Corporation Price and Consensus

 

Microsoft Corporation Price and Consensus | Microsoft Corporation Quote

Nevertheless, we believe that Amazon will maintain its dominant position on the back of its worldwide expansion plans.

AWS is gearing up to expand in Middle East countries as well. The company plans to open 12 more availability zones across four regions — Bahrain, Hong Kong, Sweden and a second GovCloud Region in the United States — by early 2019.

Currently, Amazon has Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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