GoKawiilNeoclouds are seeing massive hyperscaler demand as companies race to scale AI infrastructure, resulting in rapid revenue and backlog growth.
Leaders like CoreWeave and Nebius enable this through access to the latest Nvidia GPU’s while also optimizing compute utilization.
However, the bearish argument behind hyperscaler demand lies in their desire to offload their capex spending and shift costs to the operating expense line.
CoreWeave’s and Nebius’ growth is far from profitable, as they seek to capture AI demand with limited cash flow and soaring debt loads in an increasingly tough macro backdrop.
Circular financing, demonstrated by Nvidia’s investments and financial backstopping, is another key item to monitor closely
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.
Notably, CoreWeave and Nebius have each secured 3.5 GWs of contracted power capacity; while these power footprints are key considering power is a hindrance to data center expansion, the vast majority of their contracted power capacity has yet to come online. CoreWeave is targeting 1.7 GW of active power by the end of 2026, while Nebius is targeting 800 MW to 1 GW of connected power.
In turn, they are quickly working to convert their contracted power to active power, and thus convert large backlogs into revenue. Yet doing so is extremely expensive, and neoclouds do not have the same cash nor operating cash flow profiles of Big Tech. This is leading neoclouds to employ unique and circular financing structures, raising some red flags.
In this analysis, I dive into the two public neoclouds that are riding Nvidia equity, hyperscaler contracts, and GPU-backed debt to fund the buildout, and what it means for the durability of the surge.
Microsoft and Meta’s $120B+ Bet on Neoclouds
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