DigitalOcean, a leading player in the cloud hosting industry, recently declared its strategic acquisition of Paperspace, an AI-focused startup. This $111 million deal in cash underscores the company’s commitment to expanding its AI capabilities for its growing customer base.

The Acquisition

DigitalOcean’s CEO, Yancey Spruill, shared his enthusiasm about the acquisition, which he believes will pave the way for customers to effortlessly experiment, build, and roll out AI applications. The integration of Paperspace’s robust infrastructure and tooling into DigitalOcean’s existing offerings is expected to supercharge the company’s cloud services.

"Through this acquisition, we aim to simplify AI and machine learning offerings for SMBs and startups, allowing them to focus more on building applications and growing their businesses," said Yancey Spruill, CEO of DigitalOcean.

Paperspace: The Vision and Journey

Co-founded in 2014 by University of Michigan graduates Daniel Kobran and Dillon Erb, Paperspace initially focused on providing low-cost virtual machines for high-performance workstations for design, visualization, and gaming in the cloud. It then pivoted to AI, launching a suite of tools for developing, training, deploying, and hosting AI models in the cloud.

“We’re thrilled to join forces with DigitalOcean, as we believe there’s no better company to unlock the endless possibilities of AI and machine learning for developers and businesses alike.” – Dillon Erb, Co-founder of Paperspace

The Impact on Paperspace’s Customers

While Paperspace will continue to operate as an independent business unit within DigitalOcean, its customers can look forward to benefiting from DigitalOcean’s extensive cloud services, including databases, storage, app hosting, documentation, tutorials, and a robust support system.

4The Strategic Move

This acquisition marks DigitalOcean’s first since 2022 when it purchased Pakistani cloud hosting service provider Cloudways for $350 million. It’s also the fourth since its public stock listing in 2021. This move could be seen as a strategic response to the increasing demand for AI and machine learning solutions in the cloud industry.

DigitalOcean’s Performance

Though DigitalOcean’s revenue surged by 29.7% to $165.13 million in Q1 2023, its earnings per share, return on equity, and net margin fell short of expectations.

The Rising Demand for AI in the Cloud

There’s a growing trend among Big Tech cloud providers like Microsoft, Amazon, and Google to invest in generative AI technologies for revenue boost. A recent CNBC poll revealed that AI is now the biggest investment area for nearly 50% of top executives across various sectors.

Market Predictions

Driven by the growing enthusiasm for AI, Gartner predicts that cloud spending will soar by 21.7% in 2023, reaching nearly $600 billion as against $491 billion in the previous year.

The Future of DigitalOcean and Paperspace

The merger of DigitalOcean and Paperspace is expected to present a comprehensive offering of cloud CPU and GPU compute that can compete with other vendors in the public cloud market. It may also open doors for a new class of customer, particularly those on a tight budget, to explore AI- and machine learning-powered apps.

Exploring AI Offerings

Some of the AI applications that could be explored include generative media (like OpenAI’s DALL-E 2), large language models (like ChatGPT), recommendation engines, and image classifiers.

The Future

DigitalOcean’s acquisition of Paperspace signals a significant shift in the cloud industry, with a greater focus on making AI and machine learning more accessible to users. As the demand for these technologies continues to grow, the industry can expect further advancements and integrations in the near future.