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After quarters of rapid growth fueled by remote work, the cloud market is cooling down as businesses look for ways to curb cloud spending in post-COVID times and an uncertain economy. AWS saw its growth slide to the mid-teens<\/a> in the first month of the new year; across the industry, the market slowed to 21% growth<\/a>, down from 36% the year before.<\/p>\n There is a silver lining \u2014 U.S. cloud giants are getting business from Chinese internet firms that are looking to set up shop overseas. China\u2019s tech companies have been expanding abroad for decades, but many feel a new urgency to venture out amid growing competition and compliance risks at home (which you can read about in detail here<\/a>, here<\/a>, and here<\/a>).<\/p>\n TikTok\u2019s meteoric rise to global dominance is a source of inspiration for the legion of Chinese chuhai <\/em>startups, a term that literally means startups \u201cgoing to the sea\u201d and is used to describe those carving out an overseas business. TikTok, the third-largest social network only after Facebook and Instagram, will approach one billion users by 2025, forecasts market intelligence firm eMarketer<\/a>. But its challenges in the West \u2014 questions around its data security and relationship with Beijing \u2014 also sound an alarm to its followers.<\/p>\n In a bid to convince the U.S. government that it doesn\u2019t expose Americans\u2019 data to China, TikTok forged a partnership with Oracle<\/a> in late 2020 after the Trump Administration\u2019s plan to force a sale of the short video giant<\/a> fell through. In June last year, TikTok said<\/a> it was migrating all U.S. user data to Oracle\u2019s stateside servers. And in August, it was reported<\/a> that Oracle was monitoring TikTok\u2019s algorithms and moderation system for potential manipulation by China.<\/p>\n All these moves go to show the West\u2019s mistrust of companies with any Chinese link these days, whether that means having a founder with Chinese nationality or an engineering team on China\u2019s soil. The first and perhaps most important step in these firms\u2019 localization efforts \u2014 most crucially, establishing trust in Western customers and the government \u2014 is storing data in their destination market if it\u2019s a major one like the U.S. or at least a neutral country like Singapore.<\/p>\n Unsurprisingly, AWS, Microsoft Azure and Google Cloud are the top choices for China\u2019s chuhai<\/em> firms, according to dozens of conversations we had with globalizing Chinese startups over the years. China\u2019s own tech powerhouses Alibaba and Tencent also offer cloud solutions to seafaring customers, but picking a Chinese vendor is probably the last thing companies want to do in trying to appease Western regulators\u2019 data security concerns.<\/p>\n Would this wave of\u00a0chuhai<\/em> startups be a big boost to the Western cloud market? Probably not in the short term. Most of these companies are still in the early days of their global expedition; even the TikTok deal won\u2019t move Oracle\u2019s cloud market share needle significantly, my colleague Ron wrote<\/a>. But assuming a number of players eventually achieves a meaningful overseas footprint, their preference for U.S. cloud providers will hurt China\u2019s cloud providers.<\/p>\n Case in point, Alibaba pointed out in its June 2022 earnings report that its cloud segment was hit by the loss of a key client, as it saw a \u201cdecline in revenue from the top Internet customer that has gradually stopped using our overseas cloud services for its international business due to non-product related requirements.\u201d <\/span>This top internet customer was speculated to be TikTok, which <\/span>reportedly moved off Alibaba Cloud<\/a> as geopolitical tensions heightened.<\/p>\n<\/p><\/div>\n