Most neoclouds are doomed, according to Elon Musk, with funding thin on the ground for companies with no revenue source other than AI data centers.

With around 200 players currently in the market supplying specialized cloud infrastructure to run AI workloads, they're struggling to secure debt-market financing, and a massive shakeout is on the cards, he said.

"As of the past few weeks, debt markets have almost entirely shut off access to money for any company that doesn't have substantial revenue independent of AI data centers," he wrote on X.

"That means the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many."

"I think we're going to see a lot of stranded compute in partially complete data centers," he added.

Musk contrasted the lack of investment with SpaceX's position. The firm has successfully secured $40 billion of debt for Nvidia GPUs, he said, because it's "investment grade", and has additional revenue coming in from its Starlink, satellite internet, and rocket launch operations.

The comments appear to confirm a recent report from the claiming that SpaceX was engaged in talks to secure $40 billion in funding, with Apollo Global Management acting as the lead investor. The cash would come in the form of around $10 billion worth of bank loans and $30 billion in investment-grade debt, the report said.

The cash will be used to support GPU deliveries in the first and second quarters of next year; the firm is expected to repay the debt early.

Musk isn't the first to sound the alarm about the long-term future of neoclouds. Earlier this month, Gartner warned that by 2030, eight-in-ten neocloud providers are likely to cease independent operations.

While hyperscalers, the firm said, have massive and highly diversified revenue sources that could plausibly sustain AI investments for years, neoclouds can't hang about, and need to quickly earn returns on AI-optimized IaaS and associated platforms if they're to sustain operations.

"The growth in spending on AI-optimized IaaS will be too low for most AI compute providers to recover their AI investments before the current generation of AI semiconductors is replaced," said Will Sommer, senior director analyst at Gartner.

Meanwhile, venture capitalist Chamath Palihapitiya has expressed similar concerns, saying that hyperscalers like Amazon, Microsoft and Google are, unsurprisingly, focusing on their own internal compute needs rather than any third party.

"All of this is to say that it does look like there will be a lot of partially stranded compute and compute sitting in inventory in 2027 than is currently forecasted," he wrote on X.

"This dislocation will benefit two kinds of orgs: the non-bureaucratic big scalers who can build industrial scale quickly and the nimble, well-capitalized players feeding them. 2027 will be a turbulent year because it will clear out a bunch of wrong/bad bets. It will also be a consolidation year for a few."

The warnings come just a couple of weeks after CoreWave – the world's largest neocloud – saw its stock price fall by 38% in a month, and 60% over the last year. And today, after Musk's warning, it's fallen further, along with Nebius and Iren.