Nvidia CEO Jensen Huang says demand for neocloud providers is running far ahead of the capital available to fund their expansion.
Speaking to CNBC during Nvidia's GTC conference in Berlin, Huang pointed to financing and electricity as the main constraints on AI infrastructure growth.
Neoclouds supply the computing infrastructure and services that support artificial intelligence workloads.
Huang said demand is rising across many AI sectors, yet working capital has not kept pace with the industry's financing needs.
Financing gap and power access
He described the underlying market demand as exceptionally strong, saying interest in neoclouds is off the charts and their capabilities are extraordinary.
The immediate obstacle, according to Huang, is the working capital needed to fuel growth.
He said capital is scarce because demand spans so many parts of AI.
Huang acknowledged the gap between funding needs and available financing remains substantial, but he expressed confidence the imbalance will eventually be resolved.
Electricity availability poses another major challenge, particularly in Europe, where power prices are higher.
He said access to limited energy resources will matter for companies such as Nebius and Mistral as they build infrastructure and expand AI operations.
Huang argued that attracting investment alone would not be enough without the physical infrastructure to support AI services and businesses.
He said local neocloud infrastructure could serve as the foundation for a broader European AI ecosystem, with services and economic activity built around computing capacity located in the region.
Huang also called for a substantial expansion of neocloud capacity across the continent.
The outlook comes as investors reassess the costs and financing risks tied to rapid AI infrastructure expansion.
Shares in the sector have faced selling pressure over concerns that returns from data center investments could take longer than expected.
Investors have also raised concerns about CoreWeave's reliance on debt to finance its data center expansion.
In premarket trading on Thursday, Nebius shares fell 3.6% and CoreWeave declined 4%, while Iren and Applied Digital each lost nearly 4%.
Nvidia has been expanding its engagement with Europe's AI industry through investments in companies, universities, and research institutions, committing nearly $10 billion to these efforts.
During a visit to London the previous week, Nvidia announced an investment stake worth more than $1 billion across five U.
K. startups.
The company is also investing in French startups as it seeks to expand its presence in the region.
Huang said the initiative aims to build on Europe's existing technological and industrial capabilities, including its scientific research and engineering expertise.
He told CNBC that Nvidia is trying to kickstart the AI economy in Europe, citing the region's technology, industrial know-how, and science base as ready to engage.
