The AI Buildout is Accelerating
The current artificial intelligence buildout is the largest industrial buildout since the railroad boom in the 1800s. America’s leading big tech companies are spending hundreds of billions of dollars to capture their piece of the fastest-growing industry since the internet in the late 1990s. In 2026, AI hyperscalers Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), Amazon (AMZN), and Oracle (ORCL) are expected to spend ~$700 billion on AI infrastructure CAPEX. By 2027, these hyperscalers are expected to spend a mind-boggling $729 billion in CAPEX. Much of that CAPEX spend is going to data centers, high-powered semiconductors, and energy.
What is a Neocloud?
Currently, much investor attention is focused on who will win the battle among frontier model labs like Anthropic and OpenAI. However, OpenAI and Anthropic have yet to IPO, and when they do, their valuations are likely to be sky-high. Nevertheless, instead of picking winners in the frontier space, investors can focus on the “picks and shovels” plays driving the AI boom.
Neoclouds are specialized cloud computing providers that rent the high-performance graphics processing units (GPUs) required to power artificial intelligence. These neoclouds differ from legacy cloud providers because they focus solely on delivering the compute needed for AI. Neoclouds have two major advantages over legacy cloud providers – they are less expensive than traditional cloud providers, and they require no hardware ownership (allowing tech firms to scale AI models without purchasing their own physical infrastructure).
Which Neocloud is the Best Investment?
Three of the main publicly traded neoclouds are Nebius Group (NBIS), IREN (IREN), and CoreWeave (CRWV). The three leading neocloud providers share several similarities. For instance, each has a multi-year partnership with leading semiconductor company NVIDIA (NVDA). Additionally, the three companies have landed multi-billion-dollar contracts in recent months. However, investors must understand the key differences. For example, stock performance varies widely. Over the past year, Nebius is up 109.70%, IREN is up 11.50%, and CoreWeave is down 38.90%.
Image Source: Zacks Investment Research
Why is Nebius Outperforming IREN & CoreWeave?
Although all the neoclouds are growing rapidly, Nebius is growing the fastest. Zacks Consensus Estimates suggest Nebius will grow revenue a blistering 530.09% in 2026 (vs. 151% for CRWV & 346% for IREN).
Image Source: Zacks Investment Research
