"Withou competition" seems like the problem. Competitors are going to get the same advantages from Moore's law, and they've already demonstrated the are exerting pricing pressure on AWS.

That assumes customers do not eat all the computation gains. That's an incorrect assumption, cloud customers will always eat all computation gains. Every unit of extra power a customer can get at zero additional cost, they will consume. It's a corollary to Moore's Law, and it's why customers bother to upgrade processors each generation.

In the time Amazon's cost for 10 Ghz went down by half, the demand for processing doubled.

That's good news. If they offer X processing for the same price and demand doubles that means revenue doubles. If they get 2x supply for current 1x price then they just made more profit.

Just because computing gets cheaper doesn't mean they have to offer it for cheaper. It's likely competition will force the price down, but the point the parent is making is that the price of service doesn't have to come down as fast as the cost of service does. That would imply more profit without raising prices, merely holding them steady while costs go down.