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ecosystems that many enterprises
still use. Amazon’s Cloud database,
Aurora, has been a long time in the
making but in Bezos’ view, the long
learning time only goes to show
how vast the prospects are. Aurora
provides the security and reliability
of commercial databases at one-tenth
the cost. The attractions are obvious.
As in many other facets of internet
and technology, the Cloud world is
increasingly polarised between US and
Chinese spheres of influence. In fact,
the very idea of Cloud infrastructure
is different in the Chinese context.
Alibaba’s Cloud business is doubling
each year and focuses on providing
basic tools to the small and medium-
sized business sector to which it has
never previously had access. Chinese
enterprises have historically built their
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own software whilst SMEs have used
manual processes that exploit the
abundance of cheap labour or used
pirated productivity tools. All of this
means that the business software sector
has not yet established itself. Alibaba is
changing this with affordable connected
tools and is clearly channelling a big
pool of pent-up demand.
No matter where a business is
based, the attractions of the Cloud
are apparent. The likely cost savings
are appealing but the value from the
business intelligence it creates is even
more significant. With 5G networks
soon to be rolled out globally, and
the explosion in data continuing,
enterprises are looking for insights
that can benefit their decision-
making. This is where Artificial
Intelligence (AI) comes into play as
it excels when making predictions
from large datasets and ultimately,
the Cloud is how many companies are
going to make use of AI.
Streaming companies such as Netflix
and Spotify that host their platforms in
the Cloud use AI tools to recommend
films and songs that they hope are
to our tastes. Amazon’s product
recommendations on their website
are generated using machine learning
algorithms hosted on AWS.
There is potential that as these
gradually improve, it may become more
economical and profitable for Amazon
to send products before the user has
requested them. Their taking out a
patent for ‘anticipatory shipping’ shows
they are serious. This is only possible
due to the Cloud, the intersection of
deeper datasets and more powerful
AI tools. Our holdings in Amazon,
Alphabet and Alibaba should all benefit
as this transition continues.
This is the third in a series of three articles.
Investments with exposure to overseas securities can be affected
by changing stock market conditions and currency exchange rates. The
views expressed in this article should not be considered as advice or a
recommendation to buy, sell or hold a particular investment. The article
contains information and opinion on investments that does not constitute
independent investment research, and is therefore not subject to the
protections afforded to independent research.
Some of the views expressed are not necessarily those of Baillie Gifford.
Investment markets and conditions can change rapidly, therefore the views
expressed should not be taken as statements of fact nor should reliance be
placed on them when making investment decisions.
A Key Information Document is available by visiting www.bailliegifford.com
Tom Slater
Tom graduated BSc in Computer Science with Mathematics from the
University of Edinburgh in 2000. He joined Baillie Gifford the same year
and worked in the Developed Asia and UK Equity teams before joining the
Long Term Global Growth Team at the start of 2009. Tom became a Partner
in the firm in 2012. Tom was appointed Joint Manager of Scottish Mortgage
Investment Trust in January 2015 having served as Deputy Manager for the
previous five years. In 2015 Tom was appointed Head of the US Equities
Team and is a decision maker on Long Term Global Growth portfolios. Tom’s
investment interest is focused on high growth companies both in listed
equity markets and as an investor in private companies.
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