Firms like OpenAI and Meta claim a compute shortage while also exploring selling compute capacity. This isn't a contradiction but a strategic evolution. They are buying all available supply to secure their own needs and then arbitraging the excess, effectively becoming smaller-scale cloud providers for AI.

AI applications often have long waiting periods for model responses or user input, but traditional cloud platforms charge for this idle time. Vercel's "Fluid Compute" is designed so customers only pay when the application is actively processing, making it fundamentally more cost-effective for AI workloads.

Instead of bearing the full cost and risk of building new AI data centers, large cloud providers like Microsoft use CoreWeave for 'overflow' compute. This allows them to meet surges in customer demand without committing capital to assets that depreciate quickly and may become competitors' infrastructure in the long run.

Inspired by Google, Cloudflare made an early decision to build its global network using inexpensive, commodity hardware instead of specialized equipment. This software-centric approach allows them to scale their infrastructure rapidly and cost-effectively, a key structural advantage over competitors.

Don't try to compete with hyperscalers like AWS or GCP on their home turf. Instead, differentiate by focusing on areas they inherently neglect, such as multi-cloud management and hybrid on-premise integration. The winning strategy is to fit into and augment a customer's existing cloud strategy, not attempt to replace it.

By offering generous free services, Cloudflare aggregates immense web traffic. This scale gives them leverage to negotiate peering agreements with ISPs, drastically lowering their bandwidth costs. This cost advantage, reinvested into the network, creates a powerful, hard-to-replicate competitive moat.

By successfully deploying data centers in the world's harshest locations—from Saudi deserts to the Arctic and aircraft carriers—Armada proves its technology's resilience. This creates a powerful competitive advantage and a high barrier to entry for competitors in the edge infrastructure market.

Cloudflare's simple "intercept everything" model wasn't what large enterprise customers of incumbents like Akamai wanted. This classic innovator's dilemma meant legacy players ignored the long-tail market, allowing Cloudflare to build a massive network and eventually move upmarket.

The shift to usage-based pricing for AI tools isn't just a revenue growth strategy. Enterprise vendors are adopting it to offset their own escalating cloud infrastructure costs, which scale directly with customer usage, thereby protecting their profit margins from their own suppliers.