The neocloud shakeout is coming, and Nvidia has the most to lose
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The AI cloud industry is facing a significant shakeout as investor confidence wavers, leading to stock crashes and canceled IPOs among emerging providers known as neoclouds. Industry experts predict that consolidation is inevitable, with only seven to ten of the hundreds of current players likely to survive long-term. This turmoil poses a substantial risk to Nvidia, which derives 45 percent of its data center revenue from customers outside major tech hyperscalers. To support these partners, Nvidia has actively provided credit guarantees, equity investments, and assistance in securing power infrastructure for new data centers. However, challenges such as delayed power connections and cautious investors are already causing projects to stall, as seen with Microsoft pulling out of a deal with Nscale. Analysts warn that an eventual oversupply of compute capacity could drive prices down, further threatening the viability of smaller neoclouds. Consequently, many independent providers face the prospect of ceasing operations or being acquired by larger asset managers within the next few years.
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