Gartner Predicts 80% of Neocloud Providers Will Cease Operations by 2030

Gartner has revised its prediction for the AI cloud market, projecting that neocloud providers will capture 20% of the market by 2030. However, the technology advisory firm now believes that there will be nearly $1 trillion spent on AI infrastructure this year, with an additional $6 trillion spent between 2027 and 2030. This spending is expected to lead to a significant gap between revenue and capital expenditures, resulting in massive write-offs in the AI data center space.

Neoclouds are currently in a high-leverage race to reach scale and profitability, and produce strong operating cash flow to cover their expenses. They are spending a massive amount building out their infrastructure and financing most of it with debt, which makes investing in the space risky.

Unlike traditional cloud computing providers, neoclouds don’t have strong core businesses to help fund their build-outs, making it difficult for them to reach the level where they can cover their fixed costs.