The resignation of Jensen Huang as Nvidia chief executive raises tough questions for cloud-computing companies like CoreWeave and Nebius, which have benefited from the chip maker's investments.
Under Huang's leadership, Nvidia invested in multiple so-called neoclouds, which provide additional artificial-intelligence computing capacity. One rationale was to build up a base of customers who wouldn't seek to compete with Nvidia's own hardware, unlike major cloud providers such as Amazon and Google.
Now neoclouds which received Nvidia's backing -- including CoreWeave, Nebius and IREN -- face two major risks. First, that a new Nvidia CEO might choose to cut back on such support. And second, that Nvidia's dominance might fade, undercutting the value of their hardware and relationship with the company.
There are already signs Nvidia under new leadership might be more cautious about financing the AI ecosystem. Although interim CEO Colette Kress has defended such deals and rejected the term "circular financing" in her role as CFO, she previously sought to cut back on Nvidia's guarantees for data center projects, The Wall Street Journal reported late Thursday.
Of course, a new permanent CEO might think differently. But one possibility is that in future Nvidia will be more wary of offering financial guarantees around computing deals.
That's not necessarily a death knell for the neocloud sector -- or at least not the most established players. They have alternative sources of funding, even if borrowing costs are mounting, as Barron's has previously written. CoreWeave CEO Michael Intrator said this week it was abandoning unsecured public debt in favor of delayed-draw facilities which use customer contracts as collateral.
But an additional risk is that without Huang's leadership, Nvidia becomes vulnerable to other chip companies taking market share. That could reduce the value of already-purchased hardware and contracts for future chips.
"In this scenario, we believe CoreWeave would carry the biggest risk given that its infrastructure, customer proposition and expansion plans remain heavily tied to Nvidia platforms across multiple generations," wrote Evercore analyst Amit Daryanani in a research note Thursday.
Nvidia has a nearly 13% stake in CoreWeave and acts as supplier, customer and investor. CoreWeave's servers run on Nvidia chips, though the company previously told Barron's that it doesn't have an exclusive relationship with the chip maker. But it would be costly and difficult for CoreWeave to shift to hardware from alternative companies such as Advanced Micro Devices.
CoreWeave shares were down 0.7% in Friday's premarket, after a 6.9% drop the previous day.
Nebius and IREN were also slipping as investors grappled with the loss of an influential friend to the neocloud sector in Huang.
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