Nvidia could bump SpaceX to 'the front of the line' when it comes to its limited supply of chips, according to Bernstein
Analysts suggest that CoreWeave and other neocloud firms could be threatened as SpaceX spends heavily on computing resources.
SpaceX's aggressive push to provide computing resources for artificial-intelligence companies could spell bad news for neocloud companies, according to analysts.
The market for AI compute is hot right now and companies can't seem to get enough. Anthropic, for example, has reportedly struck a $10 billion, six-year contract for computing power with the startup Volta Infra Holdings and is in talks to source compute from Meta Platforms (META). It also has a deal that will see it pay SpaceX $(SPCX)$ $1.25 billion a month for computing power.
SpaceX, in an effort to transform its AI business from a financial drain to a moneymaker, is spending billions of dollars on building out its data centers. The company said demand for computing power could help put it on the path to a $100 billion annualized revenue run rate by the end of this year.
SpaceX signed contracts to provide compute to Anthropic, Alphabet $(GOOG)$ $(GOOGL)$ and startup Reflection AI last quarter. On Tuesday, it said it had a new compute deal set to begin in October. Analysts have hypothesized that customer may be either the U.S. Defense Department or a big technology firm such as Microsoft $(MSFT)$.
That may create concerns that SpaceX is a threat to neoclouds such as CoreWeave (CRWV) and Nebius Group (NBIS), according to BNP Paribas analyst Stefan Slowinski. He said in a client note that SpaceX is being much more aggressive than Meta, which provided some relief to neocloud stocks when it "seemed to downplay" its entry into the market last month.
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Slowinski said graphic processing units risk becoming a bottleneck - again - given SpaceX's relationship with Nvidia (NVDA). The company is exclusively using Nvidia's technology and is set to receive a "very significant percent" of Nvidia's GPUs in 2027, according to SpaceX CEO Elon Musk.
"There is some concern that Nvidia will bump SpaceX to the front of the line for GPU capacity, even ahead of the neoclouds it has stood up," Bernstein analysts, led by Madison Rezaei, warned in a client note.
Smaller providers without the capital SpaceX can afford to throw around may struggle to source power on good terms, Bernstein said. That could decrease the value of their relationships with Nvidia, the analysts added, which may make it even more difficult to compete with SpaceX.
Representatives for Nebius, Coreweave and Nvidia did not respond to requests for comment.
Those concerns could be addressed next week, as CoreWeave and Nebius are set to report earnings next Tuesday and Wednesday, respectively.
Wall Street expects CoreWeave to report a steeper per-share loss compared to a year earlier, though revenue is expected to more than double, according to FactSet. Analysts are also concerned about the company's debt, which is expected to grow to $33 billion, from $25 billion in the first quarter.
Nebius is also expected to post a steeper per-share loss compared to the year-ago quarter, according to FactSet. Revenue is forecast to come in at $570 million, which would reflect a 442% year-over-year increase.
-William Gavin
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