Everyone Thinks Meta’s Cloud Business Is Bad News for CRWV. Here’s What They’re Missing.

The two most common types of criticism that neoclouds receive are that they have too much debt and that they’re just renting GPUs. While these concerns may seem like genuine red flags, they miss the whole point of what a neocloud does. By definition, neclouds offer GPU-as-a-Service (GPUaaS). They’re the middlemen who buy compute and then resell it. Since compute is in extremely high demand, they can charge a premium, resulting in a hefty profit over their cost of capital.

This is also the reason why neoclouds have so much debt. Raising capital isn’t just part of the business model — it is practically the whole thing. Neoclouds take money from debt and equity investors and invest it into GPUs, much like a bank takes people’s money and invests it into assets.