Elon Musk says neoclouds are cooked, and SpaceX won't be buying them (www.businessinsider.com)

Elon Musk has taken a critical stance on the future of neocloud companies, which focus on providing computing power for AI, declaring them "cooked" in a recent post on X. He highlighted the challenges these firms face, including significant reliance on AI data center revenues and reluctance from debt markets to finance such ventures. Musk pointed out that while SpaceX has secured $40 billion in debt linked to its profitable Starlink and rocket-launch operations, neoclouds like CoreWeave and Nebius are struggling, evidenced by their substantial recent stock declines of 37% and 30%, respectively. He predicts a consolidation in the industry, with most of the over 200 neoclouds likely to fail. Musk's comments come amid broader concerns within the AI landscape regarding the viability of new entrants in the data center space. A Bernstein Research report indicated that only about 35% of planned data center capacity in the U.S. is forecasted to be built, favoring established hyperscalers like Amazon and Google. Furthermore, challenges such as "stranded compute"—computing resources that are ready but cannot be utilized due to incomplete infrastructure—highlight ongoing issues in scaling AI capabilities effectively. While Nvidia's CEO remains optimistic about the demand for AI cloud infrastructure, Musk's remarks underscore a critical moment for both neoclouds and neolabs, as the sector faces pressures from established giants and economic realities.