Musk Warns of Major Shakeup for AI Cloud Providers: GPU Rental Prices Still Rising, but Financing Begins to Tighten

Beating AI News Flash: GPUs have now even become a resale business. A founder of an AI lab revealed that they locked in a large amount of GPU computing power in advance, and now the rental prices for H100, B200, and B300 have risen 2 to 3 times. Even if they ultimately fail to train top-tier models, they can still make money simply by subleasing computing power.

But buying GPUs does not mean they can be used. Many data centers are still under construction, yet timelines keep getting delayed. Investor Chamath worries that in 2027, a batch of GPUs will be left gathering dust because the machine rooms are not completed and the power is not connected. Even if they are successfully put into use, the rental income earned may not be enough to cover financing costs.

Money is also getting harder to borrow. A batch of CoreWeave bonds once fell this month to 78% of face value. That is equivalent to bonds originally promising to repay $100 in principal at maturity now selling for only $78, corresponding to an annualized yield to maturity of more than 16%. Gartner even predicts that by 2030, more than 80% of emerging AI cloud providers will no longer operate independently due to bankruptcy, acquisition, and other reasons.

Musk believes that the bond market in recent weeks has already begun closing its doors to AI computing power companies lacking other sources of income. He said SpaceX, backed by Starlink and its rocket launch business, has completed $40 billion in GPU debt financing.

As for the more than 200 emerging AI cloud providers on the market, Musk judges that not many will ultimately survive.