Enterprise AI just got even more expensive

Welcome to Runtime! Today: How President Trump's incoherent trade policies will put even more of a damper on an already-cooling AI boom, Oracle finally confirms (in private, to customers) that its cloud infrastructure was hacked, and the latest enterprise moves.

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Many such cases

As the full impact of the nonsensical tariffs the Trump administration imposed Wednesday on basically the entire world began to sink in Thursday, it's hard to find a sector of the economy that won't be affected one way or another. Companies building AI infrastructure temporarily dodged one bullet when chips built in Taiwan were exempted, but they still buy components and systems from a wide variety of global suppliers.

Steep tariffs on imports from countries like China, Japan, Vietnam, and South Korea will have an immediate impact on the market for enterprise tech infrastructure. "Expect major players in AI infrastructure and consumer tech to reallocate short-term spending away from expansion and toward procurement hedging or sourcing shifts," Everest Group's Abhishek Singh told Reuters.

• The raw ingredient for the AI boom — Nvidia's GPUs, assembled in Taiwan by TSMC — got a pass in this latest round of tariffs, although "the U.S. is planning targeted tariffs for chips that could come later," a U.S. government official told Reuters.
• But there are dozens or even hundreds of other components required to build servers for AI and general-purpose computing that are built and assembled in Asia.
• Dell told investors last month that an increase in tariffs would likely force it to increase prices, according to The Register, and economists said that the tariffs actually announced Wednesday were "worse than expected."
• And any data-center operators that were planning on at least trying to mitigate their emissions as they expand AI capacity will run headlong into higher costs for "solar panels, wind turbine components, and EV batteries," according to Semafor.

The tariffs arrive just as major data-center operators were already starting to rethink how quickly they really need to grow capacity as demand for AI agents — which was supposed to be the technology that finally unlocked major growth — is expected to remain slow into next year. Companies that were planning to develop greenfield AI applications might not be able to sustain those investments if the global economy falls into a 2008-style recession.

• Bloomberg reported Thursday that Microsoft is pulling back from plans to expand its future AI capacity around the world, a move CEO Satya Nadella hinted was coming back in February.
• Alibaba's Joe Tsai echoed that sentiment last week, saying "I’m still astounded by the type of numbers that are being thrown around in the United States about investing into AI."
• The tariffs will certainly increase the short-term cost of assembling Project Stargate, the Trump-endorsed joint venture between OpenAI, Oracle and Softbank that already seemed unlikely to arrive on the timeline promised before Wednesday.
• The Big Three cloud infrastructure providers will report their first-quarter earnings over the next couple of weeks, and any changes to their projections for capital expenditures over the current quarter and rest of the year will be closely scrutinized.

The most vocal proponents of the AI boom have insisted for years that the tipping point for enterprise AI will arrive when the cost of inference comes down, which is a logical progression that other technology breakthroughs have followed over time as the process for manufacturing chips, components, and servers becomes more refined and software becomes easier to develop. Trump just threw a wrench into that process.

• Enterprises embrace new technology for two basic reasons: It either generates revenue opportunities or reduces costs.
• There are some companies that have realized at least one of those goals over the last few years of the AI frenzy, but most have not.
• And if the cost of adopting a new technology goes up, the payoff needs to be even greater.

Oh yeah, that hack

Oracle's refusal to publicly discuss two separate hacking incidents in recent months can't inspire a lot of confidence in the vast majority of enterprise companies that it doesn't count as customers, but at least current customers are starting to get some information. Bloomberg reported Wednesday that the company has reached out to customers of its "legacy environment" to inform them that a breach did in fact occur that leaked "usernames, passkeys and encrypted passwords."

Whoever was behind the attack appears to have broken into Oracle's first-generation cloud infrastructure, which the company barely acknowledges these days after having moved onto its Gen2 cloud infrastructure back in 2018. According to Bloomberg, the company told customers the infrastructure that was breached "hadn't been used in eight years and that the stolen client credentials therefore posed little risk," but a source told Bloomberg that some of the compromised login credentials were in use as recently as last year.

In any event, it's not unreasonable for customers to expect that their vendors should protect their sensitive information regardless of which generation of infrastructure they rented. "An Oracle representative didn’t respond to messages seeking comment," Bloomberg said, as if companies that already had a decade of reasons not to trust Oracle would simply forget this ever happened.

Enterprise moves

Ben Canning is the new chief product officer at Alteryx, joining the data analytics company after similar product leadership roles at Smartsheet and Microsoft.

Yvonne Vervaet is the new chief growth officer at Nightwing, following similar roles at government technology contractors such as Acclaim Technical Services and ManTech International.

John Sapone is the new chief revenue officer at NinjaOne, joining the endpoint security company after similar sales leadership roles at Snowflake and ServiceNow.

Casey George is the new chief revenue officer at monday.com, after serving as executive vice president of global sales at Qlik.

The Runtime roundup

Intel and TSMC have "reached a preliminary agreement to form a joint venture to operate Intel’s chipmaking facilities," according to The Information, a deal that would involve TSMC taking a 20% stake in the beleaguered chipmaker.

Google Cloud and IBM are providing AI surveillance technology to the U.S. Customs and Border Protection agency, according to The Intercept.

Thanks for reading — see you Saturday!