The neocloud shakeout is coming, and even the neoclouds seem to know it

The neocloud industry is facing potential consolidation, according to Elon Musk and other industry insiders. Neoclouds are a business model that involves purchasing AI chips, building or leasing data centers, and renting out computing power to AI companies. However, lenders and investors are becoming wary due to the sector's heavy reliance on AI demand and the increasing debt levels.

If demand for AI services declines, it could lead to significant consolidation, with 80% of independent neoclouds ceasing operations by 2030, according to Gartner. Despite the challenges, analysts believe that the AI buildout is still ongoing, and the remaining neoclouds with real data centers, chips, and customers will survive and potentially charge higher rates.