"Demand Is Through the Roof": Huang Identified Obstacles to Neocloud's Growth Amid Its Sell-Off

Demand for the services of “neo-clouds”—cloud providers specializing in artificial intelligence infrastructure—is “skyrocketing,” but the sector’s growth is being held back by a shortage of capital—and in Europe, by a shortage of electricity as well, Nvidia CEO Jensen Huang told CNBC. He gave the interview on the sidelines of the GTC conference in Berlin. The statement came amid Nvidia’s efforts to expand its investments in the European AI sector, the network notes.

“If you look at the fundamentals, demand for neo-clouds is through the roof,” Huang said in an interview with CNBC, adding that these companies’ prospects are “exceptional.” According to him, neo-clouds lack the working capital to finance their growth: “Demand for capital far exceeds its availability.” But “this problem will be solved,” Huang is confident.

The company’s CEO cited electricity supply as another major constraint on the AI boom—especially in Europe, where electricity prices are higher. According to Huang, for companies like Nebius and Mistral to grow, it is critical that they be allocated electricity, which is in short supply in the region.

“It’s possible to attract investment [in AI] to Europe, but we need to start with our own infrastructure,” explained the top executive. “If neo-clouds can build infrastructure here in Europe, then an AI ecosystem and an AI economy can be built on that foundation. Then the flywheel of the AI economy will start spinning in Europe—and it will also close the loop in Europe.” All of Europe “will need many more neo-clouds,” according to the head of Nvidia.

Huang made these remarks amid an ongoing sell-off of cloud providers’ stocks. This pressure stems from growing investor concerns about the scale of Big Tech’s spending on AI infrastructure: the return on these investments will apparently take longer than expected. In addition, market participants are concerned about the extent to which CoreWeave—one of the largest players among neo-cloud providers—is using debt to finance the construction of data centers.

Over the past month, CoreWeave shares have already lost more than 27%; in premarket trading on October 22, they are down another nearly 4%. Shares of Netherlands-based Nebius fell by 26% and 3.6%, respectively. Iren and Applied Digital also fell by more than 4% ahead of the start of regular trading in the U.S. on October 22.

In October, Nvidia’s CEO gave a series of interviews to European media outlets, according to CNBC: the American chipmaker is seeking to expand its presence in the region and has already committed to investing nearly $10 billion in European companies, universities, and research institutes. Last week in London, Nvidia announced the purchase of stakes worth more than $1 billion in five British startups. In addition, the company is investing in a number of French startups. “We’re trying to give a boost to Europe’s AI economy,” Huang told CNBC. “Europe has enormous technological potential, vast industrial experience, and outstanding science, and it’s ready to join in building the AI economy.”

This article was AI-translated and verified by a human editor