Several neo-cloud companies grew out of the volatile cryptocurrency-mining industry and were able to repurpose the same physical infrastructure for artificial intelligence development. Their businesses benefited from the AI boom that followed the launch of OpenAI’s ChatGPT in 2022, but their success now depends heavily on AI developers, hyperscalers and data-center operators—leaving them exposed to shifts in spending and the possibility of an AI bubble.
From cryptocurrency mining to AI infrastructure
Cryptocurrency miners operate the same type of physical infrastructure used to develop AI systems. CoreWeave, for example, was founded in 2017 with a focus on Ethereum mining.
IREN, Core Scientific and Applied Digital also began by mining cryptocurrencies. Their existing infrastructure was well positioned when demand for AI computing surged in 2022 following the introduction of OpenAI’s ChatGPT.
Nebius is an outlier among these companies. It was previously known as Yandex NV and operated as part of the Russian version of Google before being spun off and renamed in 2024.
Neo-cloud companies benefit from an AI spending race
The fortunes of neo-cloud companies now rest on the performance of major AI developers and hyperscalers, as well as large data-center operators that often rank among their key customers.
“There’s just a lot of money being put into the system,” said Melissa Otto, head of visible alpha research at S&P Global. “It’s an arms race.”
Neo-cloud companies are benefiting from that spending. However, Charlie Dye, vice president and principal analyst at Forrester, said the tradeoff in their business model was “increased financial risk” as market conditions change.
Spending changes could create financial risks
Those risks include changes to the spending plans of customers of major technology companies. Shares of several neo-cloud companies fell last week after Microsoft and Google forecast AI spending below what Wall Street analysts had expected.
Anthropic and OpenAI are also drawing significant attention. Both companies are expected to begin selling shares to the public in the coming months.
If AI proves to be a bubble and that bubble bursts, neo-cloud companies “will definitely face collateral damage,” said Bradley Tusk of Tusk Ventures.
Source: www.bbc.co.uk