'Neocloud' is a name for a new generation of cloud providers that specialize in almost one thing: renting AI computing power, meaning access to Nvidia graphics processors. Unlike Amazon, Microsoft and Google, which sell hundreds of different services, these companies do one thing and try to do it faster and cheaper. The best known are US-based CoreWeave, Nebius, which recently acquired Israeli startup Inferize, and Crusoe.
How did they grow so fast? Early in the AI boom there was a severe shortage of Nvidia processors. Small, nimble companies managed to get processors, build data centers quickly and offer them to customers who could not wait for the giants. Nvidia itself encouraged this, because neoclouds are customers entirely dependent on it, and they balance the power of cloud giants developing their own chips.
Who are the customers? Mainly large AI companies that need enormous computing power, and also the cloud giants themselves, which buy capacity from neoclouds when they do not have enough. That is also the model's great weakness: most revenue comes from a handful of customers, and if one decides to build alone or switch providers, the impact is immediate. We saw it last week, when Google took over a data center site Crusoe developed in Wyoming, after Crusoe reportedly failed to sign customers for it.
The second weakness is debt. To buy processors and build data centers, neoclouds take huge loans, sometimes with the processors themselves as collateral. As long as demand grows, it works: revenue covers repayments. But if demand slows, prices fall or processors lose value faster than expected, these companies will be the first to feel it. That is why investors see them as an especially sensitive gauge of the AI boom.
The bottom line: neoclouds are a direct product of the AI era, and to a large extent the most leveraged bet on it. When they report strong growth, as CoreWeave did this week, it is a sign demand is still there. When they run into trouble, it will probably be the first sign the boom is cooling.
