Microsoft recently cancelled a deal with a British neocloud outfit called Nscale amid power supply issues which could last through to 2030.
These developments come amid a public backlash against data centres and questions about how much value AI can add to worker productivity, leaving many observers questioning whether neocloud firms are financially sound.
The success of these firms hinges on the fate of major AI developers and hyperscalers, which are even larger data centre operators that neocloud firms often count as key customers.
The cancellation highlights growing financial scrutiny facing the sector, where the amount of debt held by data centres is measured in the tens of billions of pounds.
Several neocloud firms have their roots in the volatile crypto mining industry, made of companies that generate cryptocurrencies, like Bitcoin.
Debt investors also appear spooked by these conditions and are demanding ever-higher returns from several firms in the sector.
Debt is common across neocloud firms because the hardware has to be paid for up front.
Neocloud firms often finance themselves by signing long-term lease contracts with major tech customers who need quick access to computing power.
The amount of debt held by data centres is measured in the tens of billions of pounds.
Now, the success of these firms hinges on the fate of major AI developers and hyperscalers – even larger data centre operators which neocloud firms often count as key customers.