AI cloud computing companies face ‘guppy-level death’, Elon Musk warns, as funding dries up – business live

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The flow of funding which has helped the AI industry to grow rapidly could be running dry, at least for some firms in the cloud computing world, Elon Musk has warned.

The world’s richest person declared last night that at least 200 ‘neoclouds’ – companies which provide specialized cloud infrastructure to run AI workloads – could die or consolidate because they will struggle to access capital.

Musk made the claim while also declaring that his SpaceX business has closed a $40bn debt deal to pay for the chips it needs for its artificial intelligence work.

He posted on X that firms who rely on revenue streams from AI data centers are being cold-shouldered by lenders, saying:

As of the past few weeks, debt markets have almost entirely shut off access to money for any company that doesn’t have substantial revenue independent of AI data centers.

SpaceX closed $40B of debt for GPUs, but we’re investment grade and have Starlink & launch revenue.

That means the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many.

Neoclouds are specialist cloud providers that rent out clusters of high-speed Nvidia chips to firms looking to conduct AI training and inference.

They include CoreWeave , the US firm whose share price has fallen 60% in the last as investors have questioned whether the huge investment in AI data centres will be rewarded with lucrative cash flows.

The cost of insuring CoreWeave’s debt against default has climbed in recent weeks to levels that typically suggest credit distress – Musk’s comments are unlikely ease investors concerns!