GM. This is Milk Road AI, the newsletter that's bullish on GPUs and bearish on sleep.
Nvidia just brought some of the biggest names in finance into the AI infrastructure race and our lead analyst Melvin believes that trickles down into the neocloud space.
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TIME TO PIVOT FROM MEMORY TO NEOCLOUDS? π€
Our lead analyst, Melvin, made a bold move yesterday:
βTaking some profits on MU here to put more money into neoclouds. I believe there is a larger upside for neoclouds now especially with the 500 billion dollar deal Jensen announced yesterday and most of that will flow into Neoclouds.β
When I first read this, I was fairly confused so let me break down his reasoning:
Part 1: Nvidia just opened the floodgates
On August 10, Nvidia announced partnerships with six major Wall Street firms: Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR.
Together, they're looking to mobilize up to $500B for AI infrastructure.
For reference, AWS, Microsoft Azure, Google, Meta, and Oracle are expected to spend roughly $750B on CapEx in 2026.
That's a huge new pool of capital entering the AI infrastructure race.
And here's why Melvin thinks neoclouds could be one of the biggest beneficiaries.
Part 2: Neoclouds don't need to fund everything themselves anymore
Neocloud companies like Nebius and CoreWeave need enormous amounts of capital to buy GPUs and build data centers.
Historically, that meant having a massive balance sheet.
But now, institutional financing can help bridge that gap.
In simple terms:
Wall Street provides the capital β neoclouds build the infrastructure β Nvidia provides the GPUs β AI companies rent the compute.
The ability to build AI infrastructure is no longer limited to companies with hyperscaler-sized balance sheets.
That's a big deal.
Part 3: And we're already seeing it in the numbers
Both CoreWeave and Nebius crushed earnings in a span of 24 hours.
CoreWeave's backlog went from $25.9B in Q1 2025 to $104.2B in Q2 2026 which is roughly a fourfold increase in five quarters.
While Nebius delivered strong results as well showing just how quickly demand for AI compute is expanding. π
The big picture
There is currently a growing ecosystem of neoclouds, data center operators, infrastructure providers and financial institutions all working together to build the compute AI needs.
And Nvidia just gave that ecosystem another massive source of capital.
That's why Melvin is shifting some profits from MU into neoclouds.
The memory trade has already run hard.
His view is that the next leg of the AI infrastructure trade could belong to the companies providing the compute itself.
View Melvinβs entire portfolio inside Milk Road PRO.
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