There is a layer of the artificial intelligence industry that almost nobody outside Silicon Valley can name, and it has become the thing investors are watching most closely.
They are called neoclouds. Companies like CoreWeave and Nebius run warehouses packed with expensive computers and lease that capacity to the AI developers everyone has heard of — OpenAI, Anthropic and Meta. They are the landlords of the boom rather than its stars, and the question now being asked is whether they are financially sound.
The number
Neoclouds typically finance themselves by signing long-term lease contracts with large technology customers, then borrowing against those contracts and against the AI chips themselves. The hardware has to be paid for up front, so debt is normal across the sector.
Analyst Cory Johnson of the IPO research outfit The Quiet Period told the BBC that lenders sometimes weigh the creditworthiness of a neocloud’s customers — Microsoft, Meta — more heavily than the company’s own. "This helps explain how CoreWeave accumulated $35.1bn (£26.3bn) in debt," he said.
What the forecasters expect
Analysts at Gartner predict that by 2030, 80% of neocloud firms will "cease independent operations". Forrester expects at least three to be acquired imminently "as finances get shaky".
Investors have started moving first. CoreWeave stock has lost about a quarter of its value over the past month, and shares in Nebius, IREN and Applied Digital have shed roughly as much or more over the same period. Debt investors are demanding higher returns from several firms in the sector.
CoreWeave’s chief executive Mike Intrator has said the market is behaving "irrationally" and has expressed confidence in the business model. On Thursday US Treasury Secretary Scott Bessent told CNBC that neoclouds are "a small component of the overall ecosystem".
The crypto inheritance
Several neoclouds were crypto miners first. CoreWeave was founded in 2017 to mine Ethereum; IREN, Core Scientific and Applied Digital also started there. Mining uses much the same physical infrastructure as AI training, which left them unusually well placed when ChatGPT arrived in 2022. Nebius is the outlier — it was Yandex NV, part of Russia’s answer to Google, before splitting off and renaming in 2024.
Why it wobbled this week
Neoclouds depend on their customers continuing to spend. When Microsoft and Google forecast less AI spending than Wall Street expected, several neocloud share prices fell together. Microsoft recently cancelled a deal with a British neocloud called Nscale over power supply problems that could run to 2030, and Australia’s Firmus has shelved its plans to float.
Elon Musk wrote in a recent post that more than 200 neoclouds could see "guppy-level death and consolidation", adding: "Some will make it through, but not many."
Not everyone is gloomy. Analysts at Yorkville Ives note that demand for computing power still exceeds supply and that neoclouds fill a gap larger operators cannot. But the sector’s fate is now tied to two companies that have not yet listed: Anthropic and OpenAI are both expected to sell shares to the public in the months ahead.
"If AI proves to be a bubble and bursts," said Bradley Tusk of Tusk Ventures, neocloud firms "are definitely going to face collateral damage."
