Article URL: https://io-fund.com/ai-stocks/nvidia-coreweave-nebius-circular-financing-gpu-boom Comments URL: https://news.ycombinator.com/item?id=48873836 Points: 54 # Comments: 19

Neoclouds are one of the more hotly debated AI business models, with CoreWeave and Nebius being the two most widely recognized names. These companies have seen their sales, backlog, and share prices soar, differentiating themselves through quick access to the latest GPU compute and GPU utilization advantages that allow hyperscalers to rapidly add efficient compute capacity. Notably, CoreWeave and Nebius have each secured 3.5 GWs of contracted power capacity; while these power footprints are key considering power is a hindrance to data center expansion, the vast majority of their contracted power capacity has yet to come online. CoreWeave is targeting 1.7 GW of active power by the end of 2026, while Nebius is targeting 800 MW to 1 GW of connected power. In turn, they are quickly working to convert their contracted power to active power, and thus convert large backlogs into revenue. Yet doing so is extremely expensive, and neoclouds do not have the same cash nor operating cash flow profiles of Big Tech. This is leading neoclouds to employ unique and circular financing structures, raising some red flags. In this analysis, I dive into the two public neoclouds that are riding Nvidia equity, hyperscaler contracts, and GPU-backed debt to fund the buildout, and what it means for the durability of the surge. The size of hyperscaler-neocloud partnerships compared to their current revenue is astounding. Microsoft has struck the most neocloud deals, with approximately $60 billion worth of commitments between CoreWeave, Nebius, and other private players such as Nscale. Meanwhile, Meta has committed $35.2 billion to CoreWeave in total after its recent $21 billion expansion, and an up to $27 billion deal with Nebius for a total commitment of up to $62.2 billion. Along with Meta, OpenAI is one of CoreWeave’s two largest customers, while CoreWeave also has a multi-year compute agreement with Anthropic. Alone, Microsoft and Meta’s total commitments extend up to $122.2 billion – for perspective, that is ~90% of the TTM revenue of AWS being allocated towards neoclouds over long-term capacity deals. When factoring in hyperscaler-backed deals from OpenAI and Anthropic (although exact deal value is unknown), total potential commitments surpass $145 billion. Keep in mind, CoreWeave’s FY2026 estimated revenue is $12.6B and Nebius FY26 revenue is expected to be $3.4B - therefore, these partnerships are leading to commitments that are an order of magnitude higher than current sales. The reason hyperscalers are willing to allocate this capital to a relatively new business model in the neoclouds is three-fold – quick access to leading GPU generations, optimized compute utilization, and the added benefit of not having to recognize capex on the balance sheet – we look at each of these drivers below.