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The Neocloud Boom
** Caveat — This post is not a recommendation on current Neocloud stocks, or commentary on their valuation, but instead some personal observations on the market as a whole **
A Neocloud boom feels inevitable. Clicking out one layer, the data center infrastructure buildout feels like it could turn into one of the largest wealth creation moments ever in physical infrastructure. Now that I’ve spoken in absolutes like this, we can bookmark this post for later when we look back on “signs of the top” :)
Let me caveat this post with the fact that I’m very AGI pilled. Just about any estimate for “tokens consumed by X date” or model progress or data centers built or total demand I’m taking the over.
In all seriousness, the numbers are staggering. Rumors / reports peg Anthropic / OpenAI at ~3-3.5GW of capacity to end 2025. OpenAI has talked about getting to 30GW by 2030. Let’s assume Anthropic has similar plans. Just those two alone will bring on (or plan to bring on) ~55GW over the next ~4.5 years. Now let’s assume OpenAI / Anthropic represent 30-40% of the new builds over the coming 4.5 years (I asked Claude for its best guess on this figure, I have no more specific insights here other than Claude’s estimation). That’s >150GW of new capacity in the next 4.5 years alone.
Ballpark figures are ~$50b total costs to build 1GW. For a Blackwell dominated data center, that roughly breaks down into:
~70% for chips / compute.
50% GPUs
10% networking
5% CPUs
3% Storage
2% assembly
~20% for data center shell + power infra (substations, transformers, switchgear, backup generators, hv interconnect, etc)
~5% cooling
~5% land, permitting, and other costs
So in total, ~$50b for a 1GW build, multiplied by 150GW = $7.5Tn total spend. Spread across 4.5 years that’s ~$1.7Tn / year, or ~5% of annual US GDP (~$32Tn / year). I asked Claude to come up with some historical precedents to put this in perspective:
US Railroad building out in the 1880s was ~6% of GDP
Telcom building in early 2000’s was ~1.2% of GDP
The Manhattan Project was ~0.4% of GDP
So this “AI Buildout” is high, but not as high as the railroad buildout.
So that’s the costs - $7.5Tn over 4.5 years. Someone is going to make a ton of money financing all of that.
But how about the revenue / enterprise value creation serving all of it. This is where neoclouds come in. Here’s a quick scorecard on 3 public neoclouds today: Coreweave, Nebius and IREN
This is a totally made up multiple, but Coreweave / IREN are both at ~$90b of enterprise value per live GW. Nebius quite a bit higher (again, not a comment on valuation, just doing some fun math).
Let’s say the Coreweave / Nebius “math” holds for rest of industry and $90b of enterprise value is created for every deployed GW. If we’re going to bring ~150GW online in next 4.5 years, that equates to $13.5Tn of enterprise value creation…Again, this is all funny math…Lots of that build will be done by hyperscalers, a lot of it for their own internal consumption vs to sell to others. But the numbers are wild!
Even if you assume only ~20% is captured by Neoclouds, that’s over $2.5Tn of enterprise value created in the next 4.5 years. The numbers are so big, it can’t be served by only a few players. The only natural explanation is that we’ll see a boom in Neoclouds, hence the title of this post. In a few years I bet there will be a handful of very large Neoclouds, and then a long tail (including independently owned single site neoclouds, similar to how the IPP (independent power providers) market played out. Expect PE to play a big role!
Obviously you could say my initial assumption is BS - that we’re not going to bring online another 150GW by 2030. Either because you don’t believe AI will garner that demand (but I’ll point you to my initial caveat! I’m very AI pilled…). or you think the costs are just too high as a percent of GDP. But let’s dream the dream - this could be a MASSIVE opportunity…And as far as the venture communities go, there is still a lot of skepticism around neoclouds (I’d ask them, who else is going to build out the compute for AGI!). In many ways, Neoclouds are the perfect hedge on a venture portfolio :) If everything else goes to zero because AGI captured all the value, someone will have to build, deliver, and serve that compute :)
Ok last little bit here. I was done writing the post, but thought I couldn’t write a post about Neoclouds and not bring up SpaceX. SpaceX? How are they a Neocloud? I’m sure most of the readers of this blog have been plugged into the AI news cycle, but in case not, here’s a quick summary. xAI was a AI lab Elon founded. They created two very large data centers of their own. Colossus 1 (which is estimated at ~300MW), and Colossus 2 (which has total capacity of 2GW, but estimates peg it at ~500MW operational today). SpaceX then bought xAI. They then proceeded to “rent” capacity at Colossus 1 and Colossus 2 to Anthropic! In the SpaceX S-1, they gave some details on this commercial relationship.
According to the S-1, Anthropic is paying SpaceX $15b per year (!) for this capacity. They supposedly have all of the capacity in Colossus 1 (~300MW). Impossible to know how much of Colossus 2 they have, but let’s assume it’s ~40%? That would give them an incremental ~200MW. SpaceX/xAI has to keep some for itself…and Cursor has announced they have some of that capacity (which Elon as agreed to buy as well…are you keeping up with all the acquisitions??).
So that’s $15b / year for ~500MW. To put those numbers in perspective:
SpaceX did $18.7b of revenue in the full year 2025. And they just “created” a new business line item of ~$15b in an instant! Insane. SpaceX was founded in 2002. It took them 23 years to get to an annual revenue figure of ~$19b. And with their new “neocloud” they generated almost that same amount. The opportunity for Neoclouds is massive!
This math also assumes Anthropic is paying ~$30m / MW ($15,000M / 500MW). That would be really high…Most neocloud comps are closer to the $10-$12m / MW. Coreweave guided to ~$18.5b annualized run rate revenue to end 2026, and said they’re “on track to reach or exceed our target of more than 1.7GW by the end of 2026.” This math comes out to ~$11m / MW. If Anthropic was paying $11m / MW that would mean they have ~1.4GW of capacity from SpaceX (which isn’t possible).
The $30m / MW does feel high…BUT - the contract has a 90 day out. Anyone can cancel the deal with a 90 day warning. And Anthropic is VERY compute constrained. So might they stretch on a one time deal with an out? Maybe!
Either way - I’m bulled up on the opportunity for Neoclouds :) The revenue potential is clearly massive. Now they just need to prove they can make the business model work! On revenue multiples, CoreWeave trades at ~6x NTM rev, Nebius / IREN at ~10x. On NTM EBITDA, CoreWeave is trading ~10x, with IREN / Nebius ~20x.
I believe trillions of enterprise value will be created in the neocloud space in the next 5+ years. Go grab it! I may write a piece next week that discusses why these businesses could really explode if the chips retain value after years 4-5.
Quarterly Reports Summary
Top 10 EV / NTM Revenue Multiples
Top 10 Weekly Share Price Movement
Update on Multiples
SaaS businesses are generally valued on a multiple of their revenue - in most cases the projected revenue for the next 12 months. Revenue multiples are a shorthand valuation framework. Given most software companies are not profitable, or not generating meaningful FCF, it’s the only metric to compare the entire industry against. Even a DCF is riddled with long term assumptions. The promise of SaaS is that growth in the early years leads to profits in the mature years. Multiples shown below are calculated by taking the Enterprise Value (market cap + debt - cash) / NTM revenue.
Overall Stats:
Overall Median: 3.2x
Top 5 Median: 25.0x
10Y: 4.6%
Bucketed by Growth. In the buckets below I consider high growth >22% projected NTM growth, mid growth 15%-22% and low growth <15%. I had to adjusted the cut off for “high growth.” If 22% feels a bit arbitrary, it’s because it is…I just picked a cutoff where there were ~10 companies that fit into the high growth bucket so the sample size was more statistically significant
High Growth Median: 15.6x
Mid Growth Median: 4.8x
Low Growth Median: 2.6x
EV / NTM Rev / NTM Growth
The below chart shows the EV / NTM revenue multiple divided by NTM consensus growth expectations. So a company trading at 20x NTM revenue that is projected to grow 100% would be trading at 0.2x. The goal of this graph is to show how relatively cheap / expensive each stock is relative to its growth expectations.
EV / NTM FCF
The line chart shows the median of all companies with a FCF multiple >0x and <100x. I created this subset to show companies where FCF is a relevant valuation metric.
Companies with negative NTM FCF are not listed on the chart
Scatter Plot of EV / NTM Rev Multiple vs NTM Rev Growth
How correlated is growth to valuation multiple?
Operating Metrics
Median NTM growth rate: 13%
Median LTM growth rate: 15%
Median Gross Margin: 76%
Median Operating Margin 1%
Median FCF Margin: 20%
Median Net Retention: 110%
Median CAC Payback: 36 months
Median S&M % Revenue: 35%
Median R&D % Revenue: 23%
Median G&A % Revenue: 14%
Comps Output
Rule of 40 shows rev growth + FCF margin (both LTM and NTM for growth + margins). FCF calculated as Cash Flow from Operations - Capital Expenditures
GM Adjusted Payback is calculated as: (Previous Q S&M) / (Net New ARR in Q x Gross Margin) x 12. It shows the number of months it takes for a SaaS business to pay back its fully burdened CAC on a gross profit basis. Most public companies don’t report net new ARR, so I’m taking an implied ARR metric (quarterly subscription revenue x 4). Net new ARR is simply the ARR of the current quarter, minus the ARR of the previous quarter. Companies that do not disclose subscription rev have been left out of the analysis and are listed as NA.
Sources used in this post include Bloomberg, Pitchbook and company filings
The information presented in this newsletter is the opinion of the author and does not necessarily reflect the view of any other person or entity, including Altimeter Capital Management, LP (”Altimeter”). The information provided is believed to be from reliable sources but no liability is accepted for any inaccuracies. This is for information purposes and should not be construed as an investment recommendation. Past performance is no guarantee of future performance. Altimeter is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Altimeter and its clients trade in public securities and have made and/or may make investments in or investment decisions relating to the companies referenced herein. The views expressed herein are those of the author and not of Altimeter or its clients, which reserve the right to make investment decisions or engage in trading activity that would be (or could be construed as) consistent and/or inconsistent with the views expressed herein.
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Question: the demand may be there, the money may be there, but is the power or bodies to actually build these data centers be there by 2030? I don't doubt that demand is there, but 2030 feels ambitious given the issues/delays we are already seeing with data centers announced.
Like Max, I see the main risk as coming from a supply chain source we have yet to anticipate. So maybe a (potentially profitable for the supplier) bend in the knee of the curve, followed by a long upside that surprises everyone. So patience is advised; just participate and look away. Instead of Newtonian determinism, look at this more like a probability distribution where we don't know the "laws of physics" but can nonetheless predict an outcome with some accuracy.