Oguz Erkan
Investor, Founder of Capitalist Letters
Cloud providers face a higher risk that AI labs will not meet their compute commitments as models commoditize. Labs have committed hundreds of billions in spending, which only works if the industry consolidates around them; instead, more companies keep entering the race. Meta, absent a year ago, is now ahead of Google. That is bad for the AI trade, while CoreWeave and Oracle credit spreads are widening. x.com
Falling AI inference costs are bullish for CoreWeave, Nebius, Microsoft, Amazon and Oracle, because token use explodes as prices drop while power constraints cap compute supply, so compute prices are rallying. Per Epoch AI, cost at a given performance level has fallen about 47% a quarter since 2023, though frontier intelligence gets cheaper more slowly, and token use is expected to grow 24x by 2030. Synergy Research sees neocloud revenue rising from $50 billion to almost $400 billion by 2031. x.com x.com x.com
Alphabet's shift to renting neocloud GPUs threatens significant margin compression while AI monetization remains in doubt. Analysts say Google has yet to find a way to monetize AI. Google said it began using third-party compute at the end of Q3, will ramp usage in Q4 and expects near-term margin headwinds and significantly higher capex in 2027. x.com
CoreWeave's financing looks more vulnerable amid a debt-market pullback for AI-data-center-dependent companies. Elon Musk says access has almost entirely shut off in recent weeks for firms without substantial revenue outside AI data centers, and expects few of the 200-plus neoclouds to survive consolidation. x.com
AI funding is easing as lower credit-insurance costs could reopen funding. CoreWeave CDS fell to ~1,040bp from above 1,100bp; Oracle says growth should fund itself from FY29. Google kept its $195–205B 2026 capex guide, expects more in 2027 and is renting third-party compute despite margin headwinds, supporting Nebius and CoreWeave pricing power. Microsoft’s Azure growth accelerated to 48%, while Meta and Microsoft credit spreads eased. A bigger rally needs further credit easing. x.com x.com … Show more
Nebius' software efficiency and a possible end to heavy AI financing support a re-rating. Per @DrTomsLens, its engineers got about 43% more video output from the same GPUs, cutting compute cost per second by 30%; newer hardware alone is not enough without capable software teams. Oracle expects to fund growth from free cash flow in FY2029, suggesting capital-heavy AI providers may eventually outgrow debt and dilution. Google Cloud reported 103% revenue growth amid strong AI infrastructure demand. … Show more
AI usage outstripping compute supply for the foreseeable future supports semiconductor demand despite cheaper tokens. Token prices fell about 90% in roughly three months, yet usage rose by more than that drop, so compute pricing keeps rising. AI revenue extends beyond LLM providers, including Meta, Google, Salesforce and ServiceNow. On- and off-balance-sheet debt is a risk; an AI bubble is likely eventually, but none is visible now. x.com
Premium-model inference revenue could support much higher compute pricing for AI infrastructure providers. Evercore models over $120M/MW in potential lab revenue while labs pay roughly $30-50M/MW for compute. With power and GPUs scarce, SpaceX AI, Nebius, IREN and CoreWeave can capture the biggest uplift over historical pricing if they deliver contracted high-density capacity. x.com x.com
Meta's data edge and poaching of top talent support its in-house AI development against rivals buying projects to integrate. Only Google matches its data; Anthropic and OpenAI cannot really compete without funding. Meta is taking some of Google's ad share, which should reduce Google's free cash flow. x.com
A rising value of compute per watt should benefit AI cloud, chip, connectivity and power suppliers. Elon Musk says that value will rise over time. Nebius has Microsoft and Meta deals; Marvell benefits from custom silicon demand; Credo connects GPUs; Vistra has long-term nuclear supply deals with Amazon and Meta; Nokia's Nvidia partnership could help it capture data-center networking growth. x.com x.com
Easing credit fears should make debt cheaper for neoclouds and other capital-heavy AI builders, allowing some of the hardest-hit infrastructure stocks to explode higher. Five-year CDS for CoreWeave, Oracle, Meta, Amazon and Nvidia peaked on October 26 and has since eased. Anthropic's S-1, AI infrastructure earnings and Oracle's investor day gave the debt market evidence of demand and returns. The risks should fade quickly so long as revenue and pricing power keep showing up. x.com
AI cloud infrastructure stocks risk falling together because neocloud providers depend on the same debt funding. Musk says debt markets have almost shut off financing for companies dependent on AI data-center revenue, though he is a chip buyer and balance sheets differ; Nebius remains up over the year. x.com
