WSS: Cryptocurrency firms continue transition to data centre colocation as demand profile remains strong in hyperscale, neocloud worlds
Earnings season has basically come to an end, but there were a few more companies that have now entered squarely into the relevant coverage areas for Internet infrastructure. The likes of Applied Digital, Core Scientific, Cipher Digital, Galaxy Digital and TeraWulf have rapidly transitioned from cryptocurrency to the business of data centre colocation and are starting to recognize revenue from neocloud and hyperscale tenants that have been contracted in the last few years, but with a flurry of them just in the last 12 months. It has been a fast rise and we look at the results coming from a number of these companies. It is still early, but the growth trajectory of this group of data centre operators will be aggressive as the contracted capacity is in the hundreds of megawatts and ramping quickly. We also look at Nebius on the neocloud side and Rackspace in managed infrastructure. Rackspace is also in a period of transition as it evolves the business to focus on enterprise AI.
The growth of these former cryptocurrency firms is a symptom of the need for capacity given an environment that is increasingly constrained. Hyperscalers are looking at various different scenarios and the rise of the consortium/JV allows hyperscalers to gather resources with a partner rather than go it alone, offsetting the financial commitment and allowing them to focus on areas of expertise. The latest JV to be established combines Blackstone and Google. Blackstone will bring the capital, raw land and energy resources, and data centre capacity to the table, while Google will provide the silicon and cloud management and delivery software. The combination is technically a new company, but this is mostly about reducing the amount of time and energy Google has to spend on data centres and freeing it to focus on strategic priorities.
The AI frontier labs also continue to search for capacity and Anthropic recently signed on to consume capacity at SpaceXAI’s campus in Memphis, Tennessee. This deal has some exit clauses that make it possible or even likely that Anthropic or SpaceXAI will walk away. But for now, it definitely serves near-term requirements for Anthropic as it continues to grow aggressively and desperately needs capacity. There was also reporting in the past week that Anthropic was considering using Microsoft’s proprietary silicon. Anthropic has been diversifying its silicon partners, including signing on for Google’s TPUs, and it is very possible it becomes an anchor tenant for the Blackstone-Google JV. We have a few more details in our analysis and discussion.
There was also strategic activity of note in the past week. An investment vehicle at Goldman Sachs acquired a stake in Canadian data centre operator QScale and NTT Data added to its global Microsoft practice with the acquisition of cloud and AI managed services and consulting provider WinWire. Meanwhile, the likes of the UAE’s Core42 and Digital Edge in Singapore raised capital for expansion initiatives.
Finally, the week saw a number of developments in the busy APAC region. Equinix is building a second data centre in Kuala Lumpur, Malaysia and Microsoft is finishing a self-build in Hyderabad, India. In Australia, SharonAI signed a large neocloud deal and Amazon confirmed that it will invest up to $33b in Southeast Asia for AI and cloud infrastructure. The investment is a strong signal for where AWS and other hyperscalers see the region headed.
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