Neocloud companies CoreWeave and Nebius are signaling strong demand and rising prices for AI chips Wall Street is gradually becoming more confident that talk of more artificial-intelligence guardrails won’t necessarily slow spending on chips and other hardware. A Rosenblatt Securities analyst pointed to two developments at neocloud providers — cloud companies that are purpose-built to offer AI services — that he thinks are supportive of a robust spending landscape going forward. Earlier this week, neocloud company Nebius said that it will raise the prices it charges customers to rent Nvidia’s graphics processing units on demand, starting in October.
The price increases even cover four-year-old H100s, according to a post on X from Futurum Chief Market Strategist Shay Boloor. H100s are Nvidia chips that are several generations old and less powerful than the newest models. Fellow neocloud company CoreWeave also said this week that it “has continued to contract new compute capacity at higher prices.” In other words, it too has been able to increase the amount it charges for AI computing services.
Don’t Short Yourself offers weekly money tips to help you earn it, stack it and grow it. I would like to receive updates and special offers from Dow Jones and affiliates. I can unsubscribe at any time.
Despite calls from Anthropic CEO Dario Amodei and other AI industry leaders over the weekend to pace the advancement of AI models, the announcements reflect continuing strong demand and the idea that “pricing is going up” for chips, Rosenblatt analyst John McPeake said. Investors have been concerned about the impact an AI slowdown would have on the amount of spending going toward AI infrastructure. However, “demand for GPU time is surging to record levels,” McPeake said in a Thursday note to clients, referring to the process by which neocloud customers rent computing power for certain amounts of time.
Shares of both CoreWeave and Nebius were down fractionally on Friday afternoon. **See more:**AI was supposed to kill Google search. These numbers show the opposite, analyst says. CoreWeave on Thursday also announced plans to raise $3 billion through a convertible-debt offering, which McPeake said shows the company “taking advantage” of a strong demand and pricing environment to shore up its balance sheet.
In addition to the convertible-debt offering, McPeake pointed to $3.3 billion from an at-the-market offering, a reference to one in which the company sells new shares, or equity, into the secondary market over time. This altogether adds $6.3 billion in financing to CoreWeave’s balance sheet, he said. In McPeake’s view, CoreWeave’s equity raises “were inevitable” given its debt-to-market-capitalization ratio of 0.9, which indicates that it is highly reliant on borrowed money.
Extract — continue reading at the source.
