Neocloud demand is 'off the charts,' but capital is scarce, Nvidia’s Huang says

Demand for neoclouds, cloud providers specializing in AI infrastructure, is “off the charts,” but a shortage of capital is holding back the sector’s growth, compounded in Europe by a lack of power, Nvidia CEO Jensen Huang told CNBC, speaking on the sidelines of the company’s GTC conference in Berlin.

Nvidia is an investor in several neoclouds and is in talks to increase its stakes in some of them. On Wednesday, for example, reports emerged that the chipmaker was discussing a potential multimillion-dollar investment in Australian data center operator Firmus after its IPO was canceled. Nvidia also owns around 10% of cloud provider CoreWeave, whose October stock selloff spilled over into other AI stocks.

“If you look at the fundamentals, the demand for the neo clouds is off the charts,” Huang told CNBC, adding that their capabilities are “extraordinary.” He said neoclouds lack the working capital to fund their growth: “The demand of the capital is much greater than the availability of the capital.” Still, he voiced confidence that the problem would be resolved: “That’s going to get solved.”

Huang fingers power supply as another major constraint on the AI boom, particularly in Europe, where electricity prices are higher. Allocating power, which is scarce in the region, to companies such as Nebius and Mistral is crucial to their growth, he said.

“You can bring investments into Europe, but you have to start with having your own infrastructure,” Huang explained. “If the neoclouds in Europe are able to establish an infrastructure here, then you can build the AI ecosystem, the AI economy on top of them, and then the flywheel of the AI economy will start in Europe. It will terminate in Europe.” He added: “Across all of Europe, you’re going to need a lot more neoclouds.”

Huang’s comments come amid a continuing selloff in cloud providers’ stocks. They have come under pressure as investors grow increasingly concerned about Big Tech’s spending on AI infrastructure, with returns on those investments apparently set to take longer than expected to materialize. Investors are also wary of how heavily CoreWeave, one of the largest neocloud providers, relies on debt to finance its data center buildout.

CoreWeave stock has lost more than 27% over the last month and is down almost another 4% in premarket trading on Thursday as of this writing. Shares of Netherlands-based Nebius have fallen 26% over the last month and are down another 3.6% in early trading. IREN and Applied Digital are also off more than 4% ahead of the U.S. market open.

Huang has given a series of interviews to European media outlets this month as Nvidia seeks to expand its presence in the region, CNBC writes. The U.S. chipmaker has already committed almost $10 billion to European companies, universities, and research institutions. In London last week, Nvidia announced investments totaling more than $1 billion in five British start-ups. It is also investing in several French projects. “We’re trying to kickstart the AI economy in Europe,” Huang told CNBC. “Europe has a tremendous amount of technology, tremendous amount of industrial know-how, incredible science and technology, and it’s ready to engage and build the AI economy here.”