Databricks raised $1 billion at a $28 billion valuation. Many believe the company will go public later this year. Databricks' CEO, Ali Ghodi, said that they are considering all options including a direct listing. It will be the most highly anticipated IPO since Snowflake (SNOW  ).

Both companies are in the 'big data' space and help companies derive insights from the massive amounts of data that is produced by modern firms. Another similarity is that both companies are cloud-based and run on top of other systems.

Google, Amazon Investments

Databricks' software helps companies process large sets of data for analysis and artificial intelligence (AI) applications. Participants in its latest funding round included Google (GOOG  ), Microsoft (MSFT  ), Amazon (AMZN  ), and Salesforce (CRM  ). Given that these are three of the leading cloud companies, their participation is a vote of confidence in Databricks' business model.

It's also a departure from Snowflake which is built on top of these cloud platforms but also competes with the cloud providers who have similar offerings in terms of data warehousing. Until Databricks, companies stored data with Hadoop, however, it's implementing Apache Spark which leads data to be better organized, sorted, and analyzed. Apache Spark is also better to deploy artificial intelligence models.


It's likely that Microsoft, Amazon, and Google were aware of Snowflake and Databricks' popularity given that both are built on top of their platforms. They chose not to invest in Snowflake which could be construed as a conflict of interest. However, they are enthusiastically investing in Databricks which indicates they are less likely to compete directly.

This is certainly a positive for Databricks and means that it could have a monopoly on this niche of 'data analysis'. Taking companies' data, processing it for analysis, and then developing AI models around the data is likely to benefit from 'network effects' and 'economies of scale'.

Basically, the more processes they run, the better they will get at running these processes which will put distance between themselves and any upstarts. It likely means that Databricks will be a very attractive stock when it debuts as it's in a fast-growing niche with a durable, competitive advantage. Further, it will be a way for investors to gain direct exposure to AI which is going to be another sector with major potential over the next decade.