What is a neocloud?
"Neocloud" refers to companies outside hyperscalers like Amazon, Microsoft and Google that rent out GPU capacity for AI training and inference. The sector grew fast, but it is now entering a shakeout.
What is happening in the sector?
- After stock crashes, Firmus scrapped its IPO.
- CoreWeave lost about a quarter of its market value.
- Microsoft pulled out of a deal with Nscale covering 23,000 Nvidia chips.
Industry executives expect only seven to ten of the hundreds of providers to survive.
Why Nvidia is most exposed
Customers outside the hyperscalers make up 45 percent of Nvidia's data center revenue, and a significant share of them are neoclouds. A downturn among these companies directly affects chip demand.
What it means for readers
This development raises questions about how much of the money flowing into AI infrastructure is durable. Gartner had earlier warned that trillions of dollars in infrastructure spending carries a writedown risk.
