Power is THE binding constraint.
Data centers are being shut down, GPUs are sold out, models are being commoditized and spot rates are rising all leads to power being critical. Not fanciful plans for power, future forecasts of BTM or distributed batteries blah blah blah but energized power today.
This means the following hierarchy is developing from greatest to least value:
- Hyperscaler
- Neocloud
- Model maker
Ideally, you are 1+3 (Google, SpaceX, Meta) where you own massive power today and have a leading set of models to keep API pricing from 3rd parties honest enough to benefit them vs the model maker. But even if you are just (1), you can still extract great economics from (3) because owning the power is the leverage.
This means (2) needs to scale up fast. If Neoclouds do not scale up fast and move up the value stack towards hyperscalers (solely measured by energized compute online today) they are going to leave a lot of revenue on the table which will complicate their long term financing plans.
Also, starting now, a neocloud’s real competitors will be well capitalized frontier model companies who will do sweetheart deals with (1) and/or will vertically integrate and try to become (1). You can see this in the fact pattern (Ant+AWS, OAI+Stargate).
Get your hands on power.
It’s the spice.
Melvin (@MelvinInvests)
This chart is the single best argument for why neoclouds are about to print money (Save this).
SpaceX is generating between $30 million and $50 million in annualized revenue for every active megawatt of compute capacity, while pure play neoclouds like CoreWeave, Nebius and IREN sit in the $9.4 million to $10.4 million range.
Traditional colocation players like Digital Realty and Equinix trail even further behind at $3.5 million to $4.4 million per MW.
That gap matters because it shows exactly how much upside exists if neoclouds can push their revenue per MW closer to the top of that range and the mechanism that gets them there is simple: GPU rental pricing.
GPU lease rates have been rising fast which is the opposite of what most people assume about a commoditized rental market.
One year H100 contract rates jumped nearly 40%, from a low of $1.70 per GPU hour in October 2025 to $2.60 by now.
This is essentially a self reinforcing cycle where tightening supply drives price increases and those price increases push neoclouds to lock in more hardware which tightens supply again.
On demand pricing is even more extreme because every GPU model is essentially sold out on demand right now, with Blackwell generation B200 pricing running $4.99 to $18 per GPU hour depending on provider.
Several neoclouds have already started raising published rates rather than cutting them, with Lambda moving from $2.99 to as high as $4.29 an hour and Verda climbing from $2.29 to $3.25.
This pricing power flows directly into that revenue per MW chart, because every megawatt of power a neocloud controls becomes more valuable the higher GPU rental rates climb.
Rising rental prices expand return on invested capital for deployed GPUs and extend the economic useful life of existing hardware, meaning neoclouds squeeze more cash flow out of the same physical footprint before needing to reinvest.
That's the real bull case underneath the chart because power and megawatts are the scarce, fixed input, since Gartner expects power constraints to limit 40% of AI data centers by 2027, while GPU lead times already run 36 to 52 weeks.
If a neocloud already has power secured and GPUs deployed, rising per GPU hour pricing translates almost directly into rising revenue per megawatt with minimal added capex and that's precisely why CoreWeave, Nebius, and peers sit so far above legacy colocation players on this chart.
Colocation companies just rent out space and power but neoclouds capture the pricing upside of the actual compute running on top of it, and as GPU scarcity persists, that spread between neoclouds and traditional colocation should only keep widening.
Bullish on Neoclouds, make sure to follow @MelvinInvests for more AI infrastructure insights and if you want to see exactly what I'm buying as an analyst at Milk Road Pro, you can check out the link below for more.
— https://nitter.net/MelvinInvests/status/2085354154990747820#m