The rapid adoption of AI has created demand for a new type of cloud provider known as the neocloud.
Unlike traditional cloud platforms such as Amazon and Microsoft, which offer a broad range of computing and enterprise services, neocloud companies focus almost exclusively on AI infrastructure. – Unlock powerful investing tools with TipRanks Premium to make smarter, more confident investment decisions – Subscribe to TipRanks Smart Investor Newsletter, and discover new investing opportunities with data-backed stock picks Their role is to provide access to high-performance GPUs and AI-optimized data centers, allowing customers to train and run AI models without investing billions of dollars in their own hardware
By specializing in large-scale GPU clusters and high-speed networking, neocloud providers are designed to meet the intensive computing requirements of modern AI workloads. This business model, often referred to as GPU-as-a-Service (GPUaaS), is expanding rapidly. Gartner estimates the market reached $18 billion last year and projects it will grow to $109 billion by 2029 (+56% CAGR), making it one of the fastest-growing segments of the tech industry.
Piper Sandler analyst James Fish is bullish on the neocloud industry, arguing that it remains one of the biggest beneficiaries of the AI infrastructure investment cycle. “The AI ‘gold-rush’ is going on with a new wave of computing focused on AI-use cases… Foundational model providers and hyperscalers require massive compute capacity, both to serve their current user bases and rapidly growing base of new customers. The lead times for compute at large sizes (often 9-12mo) requires the Cloud & AI Titans to get well-ahead of demand, and lock in compute for longer periods (generally 5+ years). As a proxy for this need for more compute power, capex across some of the leading players that the neoclouds serve has increased from $151B in 2022 to $376B in 2025, with this projected to increase to $840B in 2028,” Fish noted….