Meta Platforms (NASDAQ:META) saw its shares surge nearly 10% on Wednesday following reports that the company is launching a cloud business to sell excess artificial intelligence computing capacity. The news, first reported by Bloomberg and relayed by Reuters, sent shockwaves through the neocloud sector, with CoreWeave (NASDAQ:CRWV) and Nebius Group (NASDAQ:NBIS) suffering steep declines of 14% and 16%, respectively, as of mid-morning in New York.
According to data compiled by Reuters, Meta gained approximately $149 billion in market value on the day, while CoreWeave and Nebius collectively shed roughly $18 billion. The market reaction underscores a fundamental shift: investors are now pricing in the possibility that Meta, a major customer for these neocloud providers, could become a direct competitor by offering its own AI compute services.
Meta's Cloud Ambitions
The reported initiative, which is still under development and subject to change, would allow developers to access AI models running on Meta's servers or purchase raw compute power. This would position Meta more closely alongside established hyperscalers like Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Alphabet (NASDAQ:GOOGL), while also encroaching on the territory of the neocloud firms it currently relies on for capacity.
D.A. Davidson managing director Gil Luria commented to Reuters, “Adding Meta’s capacity is probably going to matter more for neoclouds than for the major hyperscalers.” He noted that CoreWeave and Nebius depend on Meta for growth, but Meta may not be as reliant on them.
Nebius Faces Repricing Risk
Nebius’s exposure to Meta is particularly acute. In March, the company announced a deal under which Meta committed to $12 billion in dedicated capacity over five years, starting in early 2027. An additional option allows Meta to take up to $15 billion in compute capacity if Nebius does not sell it to other customers, making the contract potentially worth $27 billion. CEO Arkady Volozh had described the deal as one that would “accelerate the build-out and growth” of Nebius’s AI cloud business.
However, the option that once provided a cushion now represents a risk. If Meta becomes a supplier of similar capacity, the $15 billion tranche could lose value or even become a liability. Investors are now forced to reprice that contingent exposure.
CoreWeave's Bigger Backlog
CoreWeave, meanwhile, reported a $21 billion commitment from Meta in March, adding to a first-quarter backlog of $99.4 billion. Revenue jumped to $2.08 billion from $982 million a year earlier, but adjusted operating margin dropped to 1% from 17%, and net loss widened to $740 million. CEO Michael Intrator described the quarter as the “strongest bookings quarter” for the company, positioning it “between the models and the silicon.”
Despite the strong backlog, the prospect of Meta competing directly raises questions about future pricing power and margin compression for both CoreWeave and Nebius.
Market Context and Implications
Meta's rally is also tied to its own spending plans. The company guided for 2026 capital expenditures of $125 billion to $145 billion, up from a prior range of $115 billion to $135 billion. First-quarter capex came in at $19.84 billion, with free cash flow of $12.39 billion. A cloud resale business would give investors a clearer line of sight into how that spending translates into revenue.
Mark Zuckerberg had hinted at the move during Meta’s annual shareholder meeting in May, saying it was “definitely on the table” and noting that other firms approach Meta “almost every week” seeking access to its AI models or extra compute power.
The timing of the sell-off was exacerbated by recent index changes. Both CoreWeave and Nebius are set to join the Nasdaq-100 before the June 22 open, which had driven some buying earlier in the week. Nebius shares had jumped 7% on Tuesday to $279.49 on the back of AI cloud demand and index inclusion news.
Outlook
For investors, the key question is no longer about demand for AI compute, but about who captures the margin. As Meta moves to monetize its own capacity, the neocloud providers that once benefited from its spending may find themselves competing for the same customers. The next few quarters will reveal whether these companies can adapt to a landscape where their largest customer is also becoming a rival.
