Elon Musk says neoclouds are cooked, and SpaceX won't be buying them

Elon Musk is a neocloud doomer.

The SpaceX CEO took a difficult stance on the forthcoming of neoclouds — cloud companies akin CoreWeave and Nebius, that specialize in providing computing power for AI — in a Sunday X post.

He wrote that debt markets are reluctant to backing any business that relies nearly entirely on AI data centers for revenue. He stated SpaceX has secured $40 milliard in debt to buy GPUs, but dissimilar neoclouds, his business earns income from its Starlink and rocket-launch activities.

"That method the 200+ neoclouds are going to see guppy-level death and consolidation," he wrote. "Some volition create it through, but not many."

Musk's article was in answer to one by project capitalist Chamath Palihapitiya, who wrote on X that neoclouds are "disorganized and poorly capitalized."

Replying to another X thread speculating if he was trying to run downward the prices of neocloud stocks and scoop them up for cheap, Musk replied, "SpaceX is not purchasing any neoclouds. Pointless."

This comes as the stocks of neocloud companies have taken hits lately amid fears of elevated debt levels and a deficiency of another income streams. CoreWeave's inventory has dropped concerning 37% in the former month, during Nebius' has dropped 30% in the identical time.

Nvidia CEO Jensen Huang, however, has maintained that petition for AI haze infrastructure is "off the charts." Nvidia is a important backer of neocloud companies akin CoreWeave, Nebius, Iren, Lambda, and others.

Another item that Musk added, in a distinct X answer on Friday, was that the industry would see a lot of "stranded compute in partially complete data centers."

By "stranded," Musk was referring to compute that is prepared to use but can't be deployed since data centers aren't yet armed to rotate it on.

As Business Insider's Eugene Kim wrote final week, Amazon Web Services is expected to obtain $5 milliard value of Nvidia GB300 racks, but the business does not have adequate power in its data centers to power them. AWS volition be storing the units in warehouses until its centers are ready.

Data centers, too, are operating into several challenges. A latest Bernstein Research study projected that lone concerning 35% of planned data center capability in the US volition be built.

Hyperscalers akin Amazon, Google, Meta, and Microsoft, which have cognition construction and functioning data centers, volition apt successfully complete building of their planned centers, the study predicted.

But Bernstein Research stated newcomers, akin community fig capitalist Kevin O'Leary whose business has pledged to build 15 gigawatts of data center capacity, were called "bragawatts," and their projects are improbable to be realized.

It's not fair the neoclouds facing a troubled extend amid an AI reckoning; neolabs are, too. Neolabs are small AI example betterment startups, akin ex-OpenAI CTO Mira Murati's Thinking Machines Lab and OpenAI cofounder Ilya Sutskever's Safe Superintelligence. These labs are heavily funded and visage powerful competition from frontier AI behemoths akin Anthropic and OpenAI.

Several VCs told Business Insider's Ben Bergman lately that neolabs were overhyped and investing in them was a contentious topic.