Motley Fool Hidden Gems Investing - AWS Goes AWOL: Are we Too Dependent on the Cloud?

Episode Date: October 20, 2025

AWS goes down again. Is it time to re-assess risk in the cloud and AI-era, where so much of the digital assistance we get is housed someplace we can’t see and controlled by someone we don’t know? David Meier, Tom King, and Tim Beyers: - Discuss the failures that led to the AWS outage this morning and which companies are services were impacted as a result. - Debate whether companies have become too dependent on AWS and its peers, especially when virtually all the in-demand AI services we’re banking on are hosted in these clouds. - Play another game of Faker or Breaker with three companies impacted by the AWS outage. Don’t wait! Be sure to get to your local bookstore and pick up a copy of David’s Gardner’s new book — Rule Breaker Investing: How to Pick the Best Stocks of the Future and Build Lasting Wealth. It’s on shelves now; get it before it’s gone! Companies discussed: AMZN, LYFT, UBER, HOOD, COIN, RBLX Host: Tim Beyers Guests: David Meier, Tom King Producer: Anand Chokkavelu Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome, Fools. I'm your host, Tim Byers. With me, our longtime Fools, David Byer, Tom king it's great to have you both here so guys just a few hours ago recording monday morning amazon web services suffered a pretty catastrophic outage in one of the eastern u.s regions and businesses that offer essential digital services have taken a hit here this isn't the first time we've seen aws go down and it's not going to be the last especially with the scale of the ai build out of which AWS plays a pretty big part. So quick reaction to your first. And Tom, I'll start with you.

Are you at all surprised by this news? Why or why not? I'm not. You know, this is a complicated system, and in a complicated system, little things can compound. So it's almost inevitable that something like this would happen. It's very similar to what happened with CrowdStrike last year. Remember when CrowdStrike caused that big outage?

You know, it recovered from that. it got on it was it is the cost of it's how things are these days yeah i mean that's a fair point i mean these these things are made up of like those you know we've seen these commercials before dave where you have the dominoes all lined up and you hit one of those dominoes and they all start falling like what's your reaction to this to be frank i'm surprised it's not happening more really, really think about this. Like this was an outage, you know, something bad happened. It was an outage for a few hours. It's slowly, everything's getting back online. Everything's back up and running. This is a massive system. Yeah. The fact that it has the reliability that

it does is an engineering Marvel. So yeah, like I, I get it. It's disappointing. Thank goodness It happened at 3 a.m. Eastern time. I don't know exactly how much traffic is flowing through there. I remember in my backyard in Northern Virginia, 35% of the world's internet traffic used to flow through my backyard at peak times. I'm not surprised, but quite frankly, I'm impressed how quickly they recovered it. I'm surprised it doesn't happen more. Maybe it does, and we just don't feel it i don't know if there is a jeff bezos shakes head approvingly meme but i think you'd be getting that right now dave i mean it's it is interesting so let's talk about this aws going dark again this has happened many times here's what we know uh aws like you said dave

went offline around 3 a.m eastern time for what appears to have been a couple of hours The rolling effects could continue, and we are recording this on a platform called Riverside. And as soon as I logged in, we got a nice little notice from Riverside saying, hey, AWS went down and services may be affected. I'm paraphrasing there. So lots of companies have been affected here. At issue were some errors in the company's DynamoDB database. So let me just briefly explain what this is.

Amazon's primary database is DynamoDB. It's a transactional database, and it's most famous for being the homegrown Amazon database that they use, really, to process transactions. So, this is meant to be a highly resilient, highly replicated database throughout the Amazon and the Amazon Web Services ecosystem. This is what they've built their business on. And what it was subject to, we don't know if it was an attack or just an error, it was subject to an outage in the DNS system, the domain name server system. When that happens, when the DNS goes out, and you probably have heard of this, like a distributed denial of service attack, that's meant to attack the DNS.

And if you do that, if you take down the DNS, it's like you having your phone and suddenly all your contacts, you can't press to call anybody because your contacts are frozen. The phone book in your phone just no longer works. You can't call anybody. When the DNS is down, that's what happens. The DNS determines when you say google.com, there's an underlying IP address that's a series of numbers and it translates google.com to those numbers and when that's down you can't do that which means the internet just stops functioning so this appears to be what happened here i'm kind of curious because the affected companies include coinbase robin hood Roblox, a bunch of others. Two questions from me, and I'll start with you this time, Dave.

You said, effectively, you're surprised this isn't happening more, but I'd like to gauge your concerns. Are you at all concerned with how much influence AWS has over modern compute? And are we creating any kind of single point of failure here? So the answer is yes, there is concern. I don't know how much I should be concerned though, because this is the direction that everything is going. Many years ago, I was talking with some folks and I'm like, when the internet came up, we are always going to be going more digital, not more analog. Okay. And you know, AWS, Azure, Google computing platform, your GCP, they all sprung up and they all provide these types of services. I don't think we're going

to a single point of failure. There's not going to be one company that always does everything for everyone. But we don't have nearly as many companies doing this as when the internet was first being created. There aren't as many IP companies, things like that. I don't know. Like I said, it's one of those things where it's the cost of doing business. If you're not going to own your own hardware and manage your own hardware, you're essentially paying for the risk of someone else having an issue and your business being affected. Yeah. Tom, I'm curious how you think about this? Because this is an issue, right? Digital businesses need to have that digital infrastructure to do business, and that infrastructure is now largely outsourced.

So how do you think about this? It is one of the downsides that we must live with. We gained many advantages from the cloud providers, and this is one of the downsides that if one of them breaks, they have a large impact on a lot of people. I'm sure you guys remember, you've been around long enough to remember the days when you would have cold rooms in your office building that were stacked with computing equipment to deliver your website and the things that you sold over the Internet. We don't have those anymore.

We outsource that to Google or Microsoft or Amazon. And we don't have to worry about keeping it working or keeping the equipment cold. Yes, it's one of the disadvantages of our current system, but we've gained many other advantages, I think, is the way to think about it. I love that you called server rooms cold rooms. Like, I've been in many... When I lived in Africa, you would go into the server room to cool down because of one of the only cold rooms in the office building. Nice. Okay. I love that you

called it that because you go into a server room and yes, it's intending to be cold. Get too close to a server, you stop being cold real fast. They run really hot. But I love that you called them that. Let's talk about risk here though, Tom, because I think you're both right. So let's call this the cost of doing business. But how would you assess risk? Because AI is here. The AI build-out is going to continue. And it's going to largely depend on these cloud infrastructure companies, quite a lot of them. They are going to be the ones that are going to do the most, let's call it GPU hoarding. They're going to do the most GPU hoarding. They are going to provide the infrastructure. And when the digital assistance you need is housed someplace else

that we can't see and it's controlled by somebody else, how should we think about companies like Coinbase, Robinhood, and Roblox? Do they need to be valued with a higher risk premium because of their dependence on something like AWS? Tom, I'll go to you first on this. I don't think so. I think that companies will take the option that costs them the least, both in terms of money and time and headaches and so on. So if you really care about resiliency of always having your services available over the internet, you would invest the money and the time and everything else to have your own servers. The reason they choose to go with one of the cloud providers is because they gain many different advantages.

It's probably cheaper for them. It's less work for them. It expands to full the needs. There is no limit to how much demand their service can supply so that you don't have, you know, there's no limit on the hardware. Amazon handles that problem or Google or Microsoft. So I think companies are always going to make a decision that is best for them in their own unique circumstances. So no, I don't think that any kind of additional risk needs to be considered here.

Dave, what do you think? I agree with what Tom was saying. I don't think there's any additional risk premium that's needed. Part of the reason is, there's actually a market that's determining where people will spend their money. We don't have a single point of failure. This isn't a monopoly. If these incidences grew in frequency, what would happen? People would switch. There's actually a massive incentive for these companies to make sure that the systems are reliable. Again, it happened early in the morning. There was an immediate response. It actually got back online pretty quickly.

If it was that serious, they responded quickly. I'm sure that they've learned. We'll see what happens going forward. But I actually think the market is what controls the risk. I realize it would be a pain to switch, but there are options available for substitution. And there are companies that are switching. All right. Up next, we're going to talk about some fakers and some breakers. It's the faker breaker game. You're listening to Motley Fool Money. All right, Fools, we're back. Thank you for listening to Motley Fool Money. We have a wide range of companies that were affected by the AWS outage today. Let's talk about three, guys. We're going to talk about three, and let's get your take on them. Are these AWS-dependent businesses

fakers, or are they breakers? And as a reminder, a faker is a company that shows outstanding growth for a brief but unsustainable period of time. They look good enough. They look enough like breakers to small F fools, some investors. So Tom coming to you first here, faker or breaker Coinbase? Um, I would probably say, uh, faker because, um, you know, it's heavily dependent on the level of, uh, speculative activity in the markets, which goes up and goes down. And when it goes down, it really, really hurts the people that are involved. So I would say break, uh, faker. Okay. I mean, this is an interesting one because the crypto markets are getting more and more real, more and more interesting. There is more real dollars flowing in particular

into Bitcoin. However, this is probably one of the most rampant areas for fraud. And with that, I'm going to give you number two here, Dave, because it's a related company, Robinhood, which has made a lot of money on orchestrating crypto. So, faker or breaker, Robinhood? Robinhood is not for me as an investor. Okay. I like that you're qualifying already, but keep going. Well, we work for The Motley Fool. We tend to think about things differently. Robinhood is a type of competitor. I will say that this is still a breaker. The reason is because you do have founders who had their vision. They knew what they wanted to do, and they were executing on it. The other thing is,

they're serving a big market, and one that's growing. And the other thing, in order to serve those markets, they continue to bring new products and services. So, they have some sort of ability that they seem to be turning into an advantage to know, hey, this is what our consumers want. So, more people are coming, more people are staying engaged. And yes, whether it was free trades or now it's crypto or now it's prediction markets, again, not for me, but that's okay. There's a lot of companies out there that don't serve me. But I see this company as having a lot of a lot of the traits of a rule breaker. Okay. I'm going to bring up the third one and I'm going to ask you both for, for a super quick take on this. Cause I think it's a company, you know,

some of it, maybe two of us, I know I'm going to be using this company later this week in order to go to fool fest in, in DC and that is Lyft. So faker or breaker, Tom Lyft, the, the not Uber, uber lookalike yeah so lyft is pretty much concentrated in the united states uber took the global expansion option i think that uber's size gives it certain advantages over lyft i know from being a regular or at least until a few years ago a regular user of both that uber was always cheaper and always quicker to get to you they also probably lose more money even Lyft or were back then at the time. I mean, I think, oh, it's hard to say, but I mean, there has to be a Lyft because Uber can't have this in a market entirely to itself.

Then we'd really be in trouble. So. Is what you're saying. It passes the test. It is the Pepsi to Uber. It does. Yes, it is. Yes. So do you, does that make it a breaker for you or does it make it a, or, or is it still not enough? It's still not enough, but I think it's an important company. It has to exist to compete with Uber. Last word, Dave. Faker or breaker? Faker is hard, but I have to push in that direction. It's interesting. If I remember my history correctly, Lyft started before Uber. I don't know. I think that's correct. I think it was called Zimcar, and then it morphed, and then Lyft was created out of Zimcar. But it got usurped by Uber. Uber just went on

a, we're going to gobble up the world, we're going to take this market share strategy. Uber has done a good job of rebounding, but I don't see it as something that can really take serious market share going forward. It'll still grow. It still provides an excellent it's the one I go to. I don't go to Uber. But no, I don't think I can call it a rule-breaker. But Faker is tough. Faker is harsh, in my opinion. This is the game, Dave. You've got to make a call. I'm going with Faker. No, I'm going with Faker. But I'm giving you the little caveat. All right. Fair enough. Up next, we preview tomorrow. There's some interesting stuff

happening. Speaking of prediction markets, there's your hint. You're listening to Motley Fool Money. All right. Back with a preview for tomorrow. You will have Emily Flippen, Sandmeat Deo, and Jason Hall talking about prediction markets. What are they? How are they approved with regulators? How much money is flowing through them now? And how can you invest in them? So if prediction markets are a legitimate market opportunity, are they based on skill? Is it just another form of gambling? This is everything you're going to hear from Emily Sandmeet and Jason tomorrow. But for today, I think we've concluded here, guys, that AWS, massive, down today for a little period of time, probably going to be down again in the future.

Doesn't mean that this is one that we should get too overhyped about, but a little bit annoying. But that's it for today. Thanks to David Meyer and Tom King for joining me today, guys. As always, People on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. That's it for Motley Fool Money today. Again, please be sure you tune in for Emily Sandmeet

and Jason tomorrow, for Dave Meyer and Tom King, for our engineer, Dan Boyd, and our producer, Ana Chakbalu. I'm Tim Byers. You've been listening to Motley Fool Money. Thanks, and see you soon, fools. Fool on.