Only seven to ten neoclouds will survive, executives say

The shakeout expectations follow a sharp reversal in sentiment. Australian provider Firmus abruptly pulled its IPO, and shares of CoreWeave and its smaller rivals fell about 20 percent, according to The Information. Bloomberg reports that CoreWeave lost a quarter of its market value, while a measure of its credit risk hit a record high. David Driggers, CEO of neocloud provider Cirrascale, said deep-pocketed asset managers, along with telecom and fiber companies, will pick up a neocloud here and there. British provider Nscale illustrates the strain: Microsoft pulled out of a data center deal in Loughton, England, where it had planned to lease 23,000 Nvidia chips, and utility providers don't expect power at the site until the 2030s. Some investors are pushing to cut Nscale's target market cap from about $30 billion to between $16 billion and $19 billion, Bloomberg reports. The survival question matters to Nvidia because its biggest customers are developing their own chips. The customer segment outside the hyperscalers, which includes the neoclouds, brought in $40 billion in the July quarter, 45 percent of Nvidia's data center revenue and more than double the figure from a year earlier. Nvidia is propping up the industry with equity investments, chip allocations, loan guarantees, and customer leads. A team led by Jensen Huang's son-in-law, Nico Caprez, is helping neoclouds find sites with available power, and Nvidia has changed its loan guarantees after larger neoclouds turned down its first offer. Analysts remain skeptical: Gartner predicts 80 percent of independent neoclouds will cease independent operations by 2030, and Bernstein estimates only 35 percent of announced North American data center capacity will ever get built. Even if every project gets built, one neocloud executive said it's a given that compute supply will eventually outstrip demand, echoing Microsoft CEO Satya Nadella's late-February 2025 podcast remark that he expected an oversupply of compute starting in 2027 and that prices will fall.