The cloud’s scrappy new cousins are getting a seat at the grown-ups’ table. Neoclouds have ridden the AI boom by renting out the computing power everyone suddenly wants. But as demand and debt climb together, Wall Street is split on whether they’re the boom’s biggest winners or most leveraged casualties.
Picking both horses: Neoclouds rent out the high-powered chips and computing capacity companies need to build and run AI. That booming demand has put CoreWeave and Nebius Group on Wall Street’s radar, with William Blair initiating coverage of both at Outperform. The firm sees scale as the edge, arguing that the biggest players can absorb smaller rivals and use hyperscaler contracts to eventually turn junk-grade credit into investment-grade financing.
- Global neocloud revenue could grow from ~$25B in 2026 to $200B–$300B by 2031, putting the industry on track for an eightfold to twelvefold expansion.
- ARK Invest bought ~255K CoreWeave shares on Tuesday, giving the stock another vote of confidence from a major growth investor.
The Bears Want To Short The Whole Basket
BCA Research sees a much shakier business underneath the AI boom. Chief strategist Noah Weisberger argues neoclouds are borrowing heavily to compete in what could ultimately become a commodity market, leaving them at risk of “destroying capital”. Meanwhile, hyperscalers like Microsoft and Alphabet generate returns well above their cost of capital. Even his best-case outcome for neoclouds is hardly flattering.
- BCA recommends an 80% long position across four hyperscalers against a 20% short basket of six neoclouds, betting established cloud giants will come out ahead.
- CoreWeave’s 28% July slide shows the volatility surrounding the trade, with BCA’s Noah Weisberger warning, “In the worst-case scenario they destroy capital.”
Rebranding the label: CoreWeave itself wants out of the category. It now serves companies like Caterpillar, Capital One, and Nasdaq, with most revenue coming from AI cloud products rather than raw Nvidia GPU access. The company is pushing further into software with Forge, a set of development tools, and says 82% of customers use at least three of its products. Product chief Chen Goldberg calls the neocloud label “temporary and without a purpose.” Call them whatever you want, investors still have to decide what the business is worth.
