Shares in neocloud companies CoreWeave (CRWV), Nebius (NBIS), and IREN Limited (IREN) traded in the red early Thursday after closing lower the previous day. This comes amid fears of rising competition. This week, aerospace and rocket giant SpaceX (SPCX) said it plans to expand its computing capacity significantly and named Nvidia (NVDA) as its exclusive chip supplier.
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High conviction CRWV bulls now have this Tradr ETFIs SpaceX a Threat to Neocloud Companies?
During its first earnings call on August 4, SpaceX reported a 247% jump in its AI revenue. The figure hit $2.56 billion. CEO Elon Musk said the company will increase its computing capacity from about 2 GW this year to almost 10 GW by year-end 2027. More importantly, SpaceX plans to rely exclusively on Nvidia’s tech.
On Wednesday, BNP Paribas analyst Stefan Slowinski warned that this could cause a shortage of Nvidia’s GPUs (graphics processing units). While the neocloud companies might benefit from their relationships with Nvidia to access GPUs, the chipmaker might prioritize SpaceX.
Nvidia’s GPUs are considered the most powerful for data center workloads. They are expensive, scarce, and highly sought after. Neocloud companies like CoreWeave, Nebius, and IREN rely heavily on supplying customers with these GPUs.
Competition Heats Up in GPU Rental Business
The latest warnings about the impact of SpaceX’s plan show that investors continue to worry about how larger players could reshape the cloud sector.
Early last month, neocloud stocks also came under pressure. This followed reports that social media giant Meta (META) plans to sell its excess AI cloud computing capacity to third parties. JPMorgan’s four-star analyst Richard Choe has argued that rising competition “could put downward pressure on GPU rental pricing.”
However, recent reports also note that Alphabet’s (GOOGL) Google plans to sell its in-house AI chips to fast-growing cloud providers. The move could help cut reliance on Nvidia.
Which Neocloud Stock Is the Best Buy?
All three neocloud stocks mentioned in this article currently carry a Moderate Buy consensus rating from Wall Street, according to TipRanks’ Stock Comparison tool.
However, IREN (IREN) offers the largest upside. The average IREN price target of $75.18 suggests more than 93% upside ahead.
