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If you listen to the White House, it’s never been a better time to bet on America (1). President Donald Trump himself has said that America is “making a freaking fortune” as a result of his policies (2).
Yet not everyone agrees these good times will last, including former White House DOGE special government employee and world’s richest man, Elon Musk, who put out a simple message on X: investors may not want to get too comfortable.
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On Oct. 25, Musk posted (3) on X in response to Canadian venture capitalist Chamath Palihapitiya, who predicted (4) that 2027 would be a “turbulent year” for companies providing infrastructure support for AI, a key part of the success of the U.S. stock market.
Palihapitiya said he expected “a lot of partially stranded compute and compute sitting in inventory.” This refers to computers sitting idle and not being fully utilized for AI related tasks.
“Pretty much,” agreed Musk in a reply (3). “I think we’re going to see a lot of stranded compute in partially complete data centers.”
While worrying about “stranded” compute might seem odd at first, Musk’s warning really addresses the companies that play a critical role in building infrastructure surrounding AI. Specifically, Musk said that over 200 neoclouds will see “guppy-level death and consolidation.”
Neoclouds are cloud computing providers built to handle the intense demands of AI workloads. Generally, neoclouds operate within data centers, where racks are loaded with high-performance AI hardware.
Musk believes many will fail as financing dries up for the companies developing AI data centers that don’t have substantial revenue independent of AI.
“Some will make it through, but not many,” he wrote.
In his original post, Musk noted that “debt markets have almost entirely shut off access to money for any company that doesn’t have substantial revenue independent of AI data centers.”
If things pan out as he predicts, the reverberations could be felt throughout the entire AI supply chain. But it could also be very bad for the markets, particularly the S&P 500, since just 10 major companies, all with varying degrees of AI exposure, represented around 40% of America’s best and brightest publicly traded companies in October (5).
