Neoclouds are one of the more hotly debated AI business models, with CoreWeave and Nebius being the two most widely recognized names. These companies have seen their sales, backlog, and share prices soar, differentiating themselves through quick access to the latest GPU compute and GPU utilization advantages that allow hyperscalers to rapidly add efficient compute capacity [1]. Microsoft and Meta have struck significant deals with CoreWeave and Nebius, with commitments totaling over $120 billion [2]. The neocloud model offers several advantages, including faster access to the latest AI infrastructure advancements and higher GPU utilization rates [3].
However, supporting the growth of these companies is extremely expensive, and neoclouds do not have the same cash nor operating cash flow profiles of Big Tech [4]. This is leading neoclouds to employ unique and circular financing structures, raising some red flags [5]. Nvidia's investments in CoreWeave and Nebius, totaling $2 billion each, demonstrate the company's commitment to the neocloud model [6]. The circular financing model, where Nvidia invests in neoclouds and receives a return tied to the rental of its GPUs, has sparked concerns about the sustainability of the GPU boom [7].
As the demand for AI compute continues to grow, neoclouds are likely to play a significant role in meeting this demand, but the risks associated with their financing models must be carefully considered [8].
