Seaport initiated coverage of so-called “neocloud” companies, a group of cloud service providers focused only on AI computing, with Neutral ratings on Coreweave and Nebius.
The brokerage said neoclouds emerged to fill a shortage of graphics chips and electricity as demand for AI infrastructure outpaced supply at traditional hyperscalers such as Amazon Web Services, Microsoft Azure and Google Cloud.
Companies including Coreweave, Nebius, Lambda and Crusoe are now rushing to build data centers to meet that demand.
“These companies are seeing surging demand, filling up their data centers,” Seaport wrote, but warned that rapid growth comes with risks.
Many neoclouds began as crypto mining operations, and now face punishing economics, including steep upfront capital spending on hardware that quickly loses value.
Coreweave alone plans to spend more than $20 billion this year on data centers. Seaport said such heavy investment, coupled with customer concentration and intense competition, could make it difficult for smaller players to survive as the sector matures.
For now, hyperscalers are underwriting much of the industry’s growth by turning to neoclouds for spare capacity. But Seaport cautioned that this overflow is temporary.
“Many of these companies exist as an arbitrage opportunity to take advantage of near-term constraints, but that window will close,” the analysts said.
Over the longer term, Seaport expects wide-ranging consolidation in the sector, with only companies that maintain solid balance sheets and sustainable business models likely to carve out a lasting role.
Source :
https://www.investing.com/news/stock-market-news/neoclouds-see-strong-demand-but-heavy-costs-4239302
