TL;DR: This article examines the fragile financial foundations of the AI datacenter industry, focusing on Coreweave and other Neoclouds whose rapid growth relies on heavy debt, circular contracts, and concentrated customer dependencies.
📋 Table of Contents
Jump to any section (20 sections available)
📹 Watch the Complete Video Tutorial
📺 Title: The Coming AI Datacenter Collapse
⏱️ Duration: 1273
👤 Channel: Wall Street Millennial
🎯 Topic: Coming Datacenter Collapse
💡 This comprehensive article is based on the tutorial above. Watch the video for visual demonstrations and detailed explanations.
The AI boom has reshaped the global economy—but beneath the soaring stock prices and record-breaking valuations lies a precarious financial house of cards. At the center of this unfolding drama is Coreweave, the largest of the so-called Neoclouds, whose explosive growth is built on massive debt, circular contracts, and customer dependencies that could unravel with a single shock. In this comprehensive guide, we dissect the fragile foundations of the AI data center industry and explain why a Coming Datacenter Collapse may be closer than investors realize.
Who Are the Real Winners of the AI Boom?
The AI revolution has created clear winners—but not all are what they seem. Nvidia stands atop the pyramid, having sold hundreds of billions of dollars worth of AI GPUs at sky-high profit margins, propelling it to become the world’s most valuable company with a market cap exceeding $4 trillion.
Close behind are the hyperscalers—Microsoft, Amazon, Google, and Oracle—who’ve seen hundreds of billions in demand for AI computing power. These cloud giants have diversified businesses: Microsoft and Oracle sell enterprise software, Google dominates search, and Amazon runs e-commerce. But AI has supercharged their cloud divisions.
Then came the Neoclouds: pure-play AI computing companies that do nothing but rent out Nvidia GPUs. The largest, Coreweave, went public in early 2025 and has become emblematic of the industry’s rapid—and risky—expansion.
Perhaps most surprisingly, Bitcoin mining companies have pivoted into AI data centers. Once stuck with obsolete, single-purpose rigs, these firms now lease their energy-intensive data center infrastructure to AI players—sparking massive stock surges as investors favor AI over crypto.
What Is a Neocloud? The Rise of Coreweave
Neoclouds like Coreweave are purpose-built for AI workloads. Unlike hyperscalers, they have no legacy businesses—they exist solely to buy GPUs and rent them out. Coreweave’s journey began in 2017 as Atlantic Crypto, an Ethereum mining operation that used Nvidia GPUs (since Ethereum mining was GPU-based at the time).
When Ethereum prices collapsed in 2018, the company rebranded to Coreweave and shifted to renting out its idle GPUs. For years, demand was modest—until late 2022, when ChatGPT’s release ignited explosive demand for GPU compute.
Microsoft, OpenAI, and the Middleman Machine
OpenAI is the single largest consumer of GPU compute. Its primary backer, Microsoft, has invested $13 billion—mostly not in cash, but in Azure cloud credits. OpenAI uses these credits to train and run its large language models on Microsoft’s infrastructure.
But Microsoft didn’t have enough GPUs to fulfill those credits. So it turned to Coreweave as a subcontractor: Coreweave supplies computing power to Microsoft, which then resells it to OpenAI using the very credits Microsoft issued. Microsoft acts as a financial and operational middleman.
In 2024, 62% of Coreweave’s $1.9 billion revenue—$1.2 billion—came from Microsoft. This dependency created a fragile link in the AI supply chain.
Nvidia’s Circular Economy: Selling GPUs and Renting Them Back
Nvidia isn’t just a hardware vendor—it’s also a cloud provider through its DGX Cloud service, which rents out Nvidia GPUs. But Nvidia doesn’t own the physical infrastructure. Instead, it sells GPUs to companies like Coreweave and then leases them back to offer DGX Cloud.
This explains a puzzling fact: in 2024, Nvidia was Coreweave’s second-largest customer, paying $300 million to rent back GPUs it had just sold. Nvidia is effectively acting as its own middleman.
However, DGX Cloud has struggled. As of early September 2025, Nvidia was scaling back the business due to poor customer adoption—few were willing to pay Nvidia’s markup over direct providers like Coreweave.
Coreweave’s Financials: Profitable on Paper, Bleeding in Reality
At first glance, Coreweave appears successful:
- 2024: $1.9B revenue, $324M operating profit, but an adjusted net loss of $18M
- First 9 months of 2025: $3.6B revenue, but operating profit collapsed to $44M (1% margin), and adjusted net loss ballooned to $860M
This loss stems from massive upfront costs: data centers require land, power contracts, and billions in Nvidia GPUs. GPUs depreciate rapidly—Nvidia releases new models every ~2 years, making older chips obsolete. Yet Coreweave depreciates them over 6 years, an optimistic assumption that inflates short-term profits.
Interest Expense Is Crushing Coreweave
As of September 30, 2025, Coreweave carried $14 billion in debt. In just nine months, it incurred $840 million in interest expense—far exceeding its meager operating profit. The company survives by borrowing more to pay old debts and fund new data centers—a classic Ponzi-like growth model.
The $56 Billion Backlog: Promise or Pipe Dream?
Coreweave claims a $56 billion revenue backlog from multi-year contracts, most lasting over 2 years, with 20% extending beyond 4 years. This implies explosive future growth—but it also demands massive capital investment.
As of Q3 2025, Coreweave operated 590 megawatts (MW) of data centers but had secured power contracts for 2.9 gigawatts (GW)—a near 5x expansion.
Industry estimates suggest 1 GW of Nvidia’s latest GPUs costs $35 billion. Filling the remaining 2.3 GW would cost $80 billion—on top of existing debt.
Off-Balance Sheet Liabilities: The Hidden Time Bomb
Coreweave rarely owns its data center buildings. Instead, it leases them—often from former Bitcoin miners who already have power infrastructure.
A key example: in January 2025, Coreweave signed a 15-year, $7 billion lease with Applied Digital (a former Bitcoin miner) for 250 MW of capacity. That’s $500 million/year, or $2 billion per GW annually.
Extrapolating across its 2.9 GW of contracted power, Coreweave could face $6 billion in annual rent and utility payments—for 15 years—while currently losing money.
OpenAI: The Insatiable Engine Behind the AI Boom
OpenAI’s hunger for compute is the primary driver of Coreweave’s growth. Despite losing money, OpenAI has signed massive contracts:
- March 2025: $11.9B deal with Coreweave (2025–2030)
- May 2025: +$4B added
- September 2025: +$6.5B added
Total committed: $22.4 billion—yet zero computing power has been delivered as data centers are still under construction.
Meanwhile, OpenAI lost $15 billion in Q3 2025 alone. For 2025, it’s expected to generate only $13 billion in revenue—but has $1.4 trillion in total cloud commitments across all providers.
Customer Concentration Risk: The OpenAI Illusion
Coreweave claims it has reduced customer concentration. In Q3 2025, it stated “no single customer represents more than 35% of backlog.” With a $56B backlog, 35% equals $19.6B.
But OpenAI’s binding contract is likely $19.6B (with the rest optional). More critically, the majority of Microsoft’s and Google’s purchases from Coreweave are ultimately destined for OpenAI.
Google Joins the Middleman Game
In June 2025, OpenAI signed a compute deal with Google—but Google lacks GPU capacity and doesn’t want to build low-margin data centers. So Google did exactly what Microsoft did: subcontracted to Coreweave.
Google, with its investment-grade credit rating, acts as a financial backstop. Even if OpenAI fails, Google must pay Coreweave—making the deal safer for lenders. Google marks up the price and profits from its creditworthiness, not technology.
In reality, OpenAI likely represents 50–70% of Coreweave’s true economic exposure—far higher than disclosed.
Nvidia’s $6.3 Billion Backstop: The Ultimate Conflict of Interest
In September 2025, Nvidia signed a shocking deal: if Coreweave faces “lack of demand,” Nvidia will purchase up to $6.3 billion of computing capacity.
This “backstop” boosts Coreweave’s creditworthiness, enabling it to borrow more and buy more Nvidia GPUs—directly benefiting Nvidia’s revenue.
But Nvidia is scaling down DGX Cloud due to poor demand. So what will it do with $6.3B of unused compute? It claims it will use it for “internal R&D”—yet Nvidia doesn’t train large language models. The explanation defies logic.
The Ford Rental Analogy: Why This Deal Makes No Sense
Imagine Ford sells 100,000 cars to Hertz. Ford then starts “Ford Rental,” leasing those same cars back from Hertz at a premium. Ford Rental fails due to high prices, so Ford shuts it down—but keeps the cars for “internal research” and offers to lease even more from Hertz to help Hertz buy new Fords.
This circular, loss-making arrangement is exactly what Nvidia and Coreweave are doing. Nvidia loses money on the lease but books more GPU sales—artificially inflating its top line.
Bitcoin Miners Turned AI Landlords
Bitcoin mining rigs can’t run AI—but their data centers can. These facilities already have massive power contracts, making them ideal for AI repurposing.
Companies like Applied Digital have stopped mining and now lease infrastructure to Neoclouds. This pivot has transformed failing crypto firms into critical AI enablers—and boosted their stock prices dramatically.
The Debt Spiral: How Coreweave Funds Its Expansion
Coreweave’s growth model relies entirely on debt:
- Borrow billions to build data centers
- Sign long-term contracts to justify more borrowing
- Use customer commitments (like OpenAI’s) as collateral
- Secure off-balance-sheet leases to avoid debt covenants
But with $4 billion of debt maturing in 2026 and minimal operating cash flow, refinancing risk is extreme.
What Happens If OpenAI Fails?
OpenAI must grow annual revenue to hundreds of billions within 5 years to justify its $1.4 trillion in commitments. If it falls short—and given its current $15B quarterly losses, that’s plausible—it could default.
A default would cascade through the ecosystem:
- Coreweave loses its primary economic customer
- Microsoft and Google face losses on resold capacity
- Nvidia’s backstop forces it to absorb worthless compute
- Lenders to Coreweave face massive write-downs
The entire AI data center boom could unravel almost overnight.
Mumu: The Trading Platform Mentioned in the Transcript
The video is sponsored by Mumu, a trading platform used by over 26 million users. Key features include:
- Zero commission on stocks, ETFs, and options
- Free Level 2 data and real-time option chains
- Community comments and news feeds for stocks like Nvidia
- Fundamental data: P/S ratio, P/E ratio, revenue by segment
As of the video’s release, Mumu offered a promotion: 8.1% yield on idle cash (3.6% base + 4.5% bonus for 3 months) and free fractional Nvidia shares for new deposits (up to $1,000 in stock for a $100+ deposit).
Timeline of Coreweave’s Evolution
| Year | Milestone |
|---|---|
| 2017 | Founded as Atlantic Crypto, an Ethereum mining company using Nvidia GPUs |
| 2018 | Ethereum price collapse → rebrands to Coreweave, starts GPU rental |
| Late 2022 | ChatGPT launch → GPU demand explodes |
| 2024 | $1.9B revenue; 62% from Microsoft; Nvidia becomes second-largest customer |
| Early 2025 | Coreweave IPO |
| March 2025 | OpenAI signs $11.9B Coreweave deal |
| May 2025 | OpenAI adds $4B to Coreweave order |
| June 2025 | OpenAI signs Google compute deal → Google subcontracts to Coreweave |
| September 2025 | OpenAI adds $6.5B; Nvidia signs $6.3B backstop; Coreweave Q3 revenue = $3.6B |
Key Financial Metrics at a Glance
| Metric | 2024 | First 9 Months of 2025 |
|---|---|---|
| Revenue | $1.9 billion | $3.6 billion |
| Operating Profit | $324 million | $44 million (1% margin) |
| Adjusted Net Loss | $18 million | $860 million |
| Total Debt (as of Sept 2025) | $14 billion | |
| Interest Expense (9 months) | $840 million | |
| Revenue Backlog | $15 billion (early 2025) | $56 billion (Q3 2025) |
Why This Matters for Investors
The AI data center boom is not just about technology—it’s a financial engineering phenomenon. Companies are using layered contracts, credit enhancements, and circular transactions to inflate valuations and secure debt. But real cash flow is minimal, and end-user demand (from companies like OpenAI) is wildly speculative.
Investors who see Nvidia’s $4 trillion valuation or Coreweave’s growth may miss the underlying fragility. The Coming Datacenter Collapse isn’t inevitable—but the risk is far higher than market prices suggest.
What’s Next? Warning Signs to Watch
Monitor these indicators for early signs of stress:
- OpenAI’s quarterly losses—if they exceed $20B/quarter, sustainability is in doubt
- Coreweave’s ability to refinance 2026 debt—$4B due could trigger a liquidity crisis
- Nvidia’s DGX Cloud revenue—continued decline undermines the backstop rationale
- Power contract cancellations—if utilities see non-payment risk, expansion halts
Conclusion: The House of Cards Must Eventually Fall
The AI boom has created unprecedented wealth—but also unprecedented risk. Coreweave’s story reveals an industry propped up by financial alchemy, not fundamentals. From Nvidia’s circular GPU sales to OpenAI’s trillion-dollar promises, every link in the chain assumes exponential growth forever.
But in the real world, growth slows, markets saturate, and debt must be repaid. When that day comes, the Coming Datacenter Collapse could wipe out hundreds of billions in market value and reshape the tech landscape once again.
For now, the music plays on—but savvy investors should be watching the exits.
