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Hands up if you’ve got a neocloud going up in your backyard! I’m joking, of course, but it almost feels like some people must be putting AI chip servers in their gardens, given the rush of people wanting to start a neocloud business. (That’s the tech world’s term for firms that rent AI servers to others.)
SoftBank on Thursday announced the creation of a U.S. neocloud venture, joining hundreds of other firms now crowding the sector. Funding still appears to be plentiful: A bunch of the younger neoclouds have raised venture funding in recent days, most recently Together AI’s $800 million fundraising unveiled on Wednesday. Meanwhile, Nvidia, which makes the dominant AI chip, is promising to financially backstop younger cloud firms in exchange for a share of their revenues, we reported on Wednesday night. Nvidia’s move raises the question of why neoclouds need a backstop if demand for computing capacity is so intense.
The answer is straightforward: Nvidia, conscious that Amazon and Google are offering alternatives, wants to ensure that demand for its AI chips remains robust. And many of the younger neoclouds are too small to borrow money on their own. The issue is that Nvidia’s financing efforts may be increasing the risks of overbuilding, at least for smaller players.
Long-established cloud firms Amazon Web Services, Google Cloud and Microsoft Azure, plus newer players like CoreWeave, are experiencing so much demand they’re spending a fortune to build more capacity. Other big firms, such as SpaceX’s AI unit, have joined the market. Meta Platforms has signaled in recent months it might also jump in, at least temporarily. Is there enough demand to go around for all these firms plus hundreds of tiny ventures?
There’s a good chance some of the newer entrants will stumble, if only because they’re inexperienced and will struggle to deliver a service at the standard customers expect. Those most at risk of losing money may be the venture backers of smaller firms. Ironically, CoreWeave, which is financing its expansion with debt, has less risk given that its financing is tied to customer contracts.
While venture investors may stand to lose the most, Nvidia is arguably taking on unnecessary risk. Sure, it has deep pockets and probably can reallocate its chips if necessary. But could it be going overboard in its efforts to ensure demand for its chips remains alive and well?
Tesla’s Rebound
Tesla reported the best second quarter for car sales in the company’s history, with a 25% year-over-year jump to 480,000 vehicle deliveries. Wow!
That’s an undeniably impressive result, likely a function of a couple of things. Trump’s war on Iran, which has caused gas prices to surge in Europe, is boosting the electric vehicle sector’s fortunes generally. While Tesla doesn’t break out regional sales in Thursday’s release, data from an auto trade group indicated Tesla sales were up 77% in Europe during the first five months of 2026.
Still, as my colleague Steve LeVine has pointed out, Chinese makers of electric cars and plug-in hybrids like BYD are benefiting even more from surging gas prices than Tesla. For example, BYD sales in Germany, the heart of the European combustion engine, were up 232% in May.
It’s also worth remembering that Tesla is rebounding from an awful period in which sales collapsed 13.5% during the same quarter last year. Recall that Q2 2025 was when Elon Musk’s work with the Trump administration was causing many would-be consumers—especially in Europe—to shun Tesla. At the same time, Musk and Trump were having a nasty falling-out stateside.
It’s unlikely that a sales rebound will prompt Musk to rethink his decision to bet Tesla’s future on robotaxis and Optimus robots, neither of which is close to becoming a big source of revenue for Tesla. That could give some momentum to U.S. rival Rivian, which reported a 14% jump in deliveries during the second quarter and has just started rolling out a new SUV it hopes will be its Tesla Model Y killer.
In any case, Tesla investors were unenthused about the second-quarter delivery figures—shares closed down 7.5%on Thursday.—Theo Wayt
In Other News
• Judson Althoff, CEO of Microsoft’s commercial business, on Thursday announced the creation of a new business unit geared toward helping large customers set up customized AI applications. Microsoft is spending $2.5 billion and assigning 6,000 employees to the effort, called Microsoft Frontier Co.
• Jay Puri, Nvidia’s top sales executive and one of CEO Jensen Huang’s direct reports, stepped down from his day-to-day role Wednesday, according to a Thursday regulatory filing. Puri, 71, told Nvidia on June 28 he intends to retire on his successor’s first day.
• OpenAI has discussed the government taking an equity stake in the company, with a range of percentages put forward, according to a person familiar with the talks, who described them as preliminary. The Financial Times earlier reported that OpenAI CEO had proposed a 5% stake.
• The European Court of Justice dismissed Google’s final appeal on Thursday in an antitrust case over its Android operating system, ending an eight-year legal battle that began when the European Commission first fined the search giant in 2018. As a result, Google will have to pay €4.1 billion ($4.7 billion).
Today on The Information’s TITV
Check out today’s episode of TITV in which we unpack Nvidia’s program to backstop younger cloud firms in exchange for a share of their revenues.
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