Prediction: SpaceX Will Be the Biggest Winner If Neoclouds Collapse

Technology consultant Gartner recently predicted that 80% of neocloud companies will no longer exist by 2030. That assessment has sent the stocks in the segment into a tailspin and could actually be the catalyst for the companies to collapse. Neocloud companies are spending a huge amount of money on AI infrastructure, most of which is funded by debt. If there is a fear that the sector could collapse because of Gartner's forecast, affordable funding could dry up, causing the industry to implode.

If this were to happen, my prediction is that SpaceX (NASDAQ: SPCX) would be the biggest winner. Here's why.

The ultimate neocloud company

SpaceX is arguably a neocloud company itself. In May, it received a large commitment from Anthropic, which agreed to pay SpaceX $1.25 billion a month through May 2009 for access to more than 300 megawatts of computing power coming from roughly 325,000 Nvidia graphics processing units (GPUs). That deal was worth about $45 billion, although Reuters reported in late September that the deal had been upped to $84.5 billion.

Those aren't the only commitments that SpaceX has grabbed this year. Alphabet will pay it $920 million a month for access to 110,000 Nvidia GPUs through June 2029. SpaceX also announced another $1.11 billion-a-month hosting deal from an unnamed party beginning in December.

SpaceX has been aggressively building out its AI infrastructure for both its own use and to rent out to customers. Chief Executive Officer Elon Musk said the company was on track to add 440,000 GPUs by the end of November, with the hope of an additional 220,000 units by the end of the year. It is also working with Apollo Capital Management and several banks to secure funding to buy $40 billion worth of GPUs from Nvidia.

This is where SpaceX has a huge advantage compared to other neoclouds. The company has a much lower cost of capital compared to others in the sector. It is investment-grade, and the GPUs will be used as collateral, so it will be able to finance its spending at a much lower interest rate. The company's high stock price and valuation are also an advantage, giving it potent currency to help fund its build-out.

Image source: The Motley Fool.

This dynamic should also make SpaceX a preferred choice among customers and banks, who may become wary of having exposure to a leveraged neocloud start-up. This should help SpaceX benefit from a flight to quality.

If neoclouds get largely wiped out, SpaceX would also likely be one of the first in line to scoop up some of these assets at a huge discount. Cloud computing companies and other hyperscalers have been increasingly turning to their own custom AI chip roadmaps, making it harder for them to absorb off-the-shelf GPU infrastructure seamlessly. SpaceX, meanwhile, has concentrated on Nvidia's GPUs, and its strong relationship with the chipmaker could give it an edge in acquiring any distressed computing assets.

In any distressed sale, Nvidia, given its backstop arrangements with neoclouds, will have a say in who gets to assume hardware leases or buy out collateral. Given its relationship with SpaceX and its stake in the stock, Nvidia would have an incentive to get these distressed GPU clusters into the hands of SpaceX. Meanwhile, the most valuable assets to acquire from a neocloud aren't its chips, but its power grid access and site permits.

If high debt and funding issues trigger a wave of neocloud bankruptcies, as predicted by Gartner, SpaceX won't just survive the fallout; it will be the primary beneficiary. It will be able to buy up cheap hardware, power access, and data center real estate to build the largest AI cloud network on Earth before tackling data centers in space. That makes the AI stock an intriguing buy on this recent sell-off.

Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.