WSS: More clues to question of next hyperscalers as sector sees more signs of growth acceleration in advance of earnings season
There has been a lot of activity over the last several weeks that offer hints for answering the question of what will be the next hyperscale cloud platforms? The question has circled Meta since the beginning of the year when it launched Meta Compute. Then at its annual shareholder meeting, CEO Mark Zuckerberg did not dismiss questions about whether Meta would get into the hyperscale cloud business, instead suggesting that it was something actively being considered. Just in the last few weeks, there has now been reporting that Meta is actively putting together a cloud infrastructure business to serve external demand. But is everything as it appears? Is Meta the next neocloud or hyperscale cloud? Not just yet. This may well be on the long-term roadmap (two things can be true at the same time), but for now, Meta looks to be monetizing capacity that is not being fully utilized. The template is out there. Very recently, SpaceXAI signed three cloud infrastructure deals for capacity at the Colossus data centre in Tennessee, including deals with Anthropic and Google Cloud. These are basically month-to-month deals, with flexible terms allowing for either side to exit, and this provides clues as to where the motivations are coming from. We have more details and analysis in our commentary.
We have commented in the past how NVIDIA would be a logical candidate to morph into a hyperscale cloud platform, but everything we have seen in the last few years points in the other direction. The market is moving quickly and the complexity inherent to the process of building hyperscale and AI infrastructure is being felt and may well just be something NVIDIA is feeling would be better left to partners. NVIDIA recently made more moves that solidify its go-to-market strategy through infrastructure service providers, implementing a revenue sharing agreement. The move is meant to accelerate time-to-market and attack bottlenecks slowing capacity from coming online.
The sector continues to show accelerating growth and the recent earnings period provided validation, with numbers basically up across the board. And the pace of growth looks to be firmly in place. DigitalOcean saw revenue growth acceleration material enough that it felt the need to disclose an update in advance of its 2Q26 earnings report, confirming momentum driven by newly signed contracts. The numbers are set to spike for DigitalOcean and it has also procured more data centre colocation capacity to support the growth.
Demand signals also continue to come from data centre leasing activity. CoreWeave remains a driver of leasing activity and confirmed plans to expand in Sweden with Conapto. Meanwhile, in North Dakota, Applied Digital’s 450MW Polaris Forge 1 site continues to bring capacity online and CoreWeave is moving into it to support the growth of its cloud infrastructure business. Applied Digital continues to execute and this continues to be something to watch for as bottlenecks across the sector have been traced back to certain projects, especially from crypto-turned data centre companies missing delivery deadlines. This is not a epidemic, but there are pockets of it happening. The demand however, continues to be there and we very recently saw TeraWulf close a lease with Anthropic for its site in Kentucky. TeraWulf also sold its stake in a JV in Abernathy, Texas to the tenant (and JV partner) Fluidstack in order to funnel resources into other areas. TeraWulf is monetizing assets to support pursuit of higher priority deals with long-term leases and this kind of flexibility is increasingly a necessary part of the hyperscale and AI data centre game.
Neocloud growth and expansion continues at a steady pace and providers are raising more capital. Hydra Host recently closed a $100m Series A round and Nscale secured a $900m credit facility to support infrastructure builds.
Finally, there was activity in Canada as Meta is building a 1GW data centre in the western province of Alberta. There has been a lot of speculation as to how viable Canada is as an AI data centre destination, and details about the Meta project are still emerging. But early indications are that bring-your-own-power is a factor with the progress being made here. There are still going to be up and downs as we also tracked a project in Alberta that did not make it to the finish line and community opposition was a factor in this case.
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