When Nscale handed over, Bernstein “took the pulse” of AI computing power clouds: CoreWeave (CRWV.US) “outperformed the market” and IREN (IREN.US) “outperformed the market”
The Zhitong Finance App learned that British AI computing power upstart Nscale officially submitted the S1 prospectus last Friday. This long-awaited document provides a new reference for the market to analyze the business model, competitive barriers and potential risks of the next-generation Neocloud (Neocloud) circuit. Bernstein released a research report to conduct a benchmarking analysis of core industry targets such as NScale and CoreWeave (CRWV.US) and IREN (IREN.US) to investigate the racetrack pattern and investment logic. Analysts maintained that CoreWeave underperformed the market rating, with a target price of $74; maintaining IREN's outperforming market rating, with a target price of $100.
The company listed CoreWeave, Nebius, Crusoe, and Lambda as its main competitors, and defined SpaceX as an “emerging large-scale computing power service provider.” In terms of common characteristics, NScale and CoreWeave are both computing power cloud companies led by the founder and born out of the crypto circuit. Both companies have established business partnerships with Nvidia, Microsoft, and Anthropic. The goals are not limited to basic GPU leasing, but seek to expand more business territory. The underlying development logic is very similar.
Differences in scale and capacity construction
Compared to the peers covered, Nscale's current size is still small, and the operating scale is lower than when CoreWeave went public. The company currently has about 25,000 active GPUs, with only 55 megawatts of computing power. The additional production capacity is mainly based on self-built computer rooms rather than leasing space from third party trustees. Currently, 31% of the sites already in operation are leased, but 76% of the pipelines are self-built.
Among the research targets covered by the bank, IREN also follows the self-built production capacity route; on the other hand, CoreWeave, the vast majority of current production capacity comes from the computer room leasing model. The self-construction model can better control the economic benefits and residual asset value of the project, but it will increase capital investment, and at the same time, it is associated with a higher risk of project implementation. Overall, the bank is more optimistic about the self-built model, but this model does not guarantee steady profits.
Geographic layout
Unlike CoreWeave and IREN, which focus on the US market, Nscale's current business focus is overseas. Although more than half of the projects under construction land in the US, after full production capacity is completed, its internationalization attributes will still be significantly stronger than CoreWeave and iREN (Nebius, which is not covered, also has a large amount of overseas computing power resources). This global layout helps win relevant orders from sovereign customers. At the same time, Nscale believes that compared to the US market, low electricity costs overseas will build its competitive advantage.
Financing strategies
Similar to its peers, Nscale comprehensively uses various tools such as equity financing, customer prepayments, equipment leasing, contract pledge debt, and data center special financing to support business expansion. Nscale uses a debt structure with asset support and deferred withdrawals, which is similar to CoreWeave, but the company entered the capital market early in its operation: currently only 55 megawatts of computing power were used, while CoreWeave reached 360 megawatts of computing power when it went public.
In addition, the Ward County project will be amortized in batches based on customer payment progress to achieve a better balance and liability match, but it also amplifies the sensitivity of the business to project execution and implementation. Like many public and private computing power cloud vendors, Nvidia provides guarantees and underwriting support for Nscale.
Benchmarking implications and key reference indicators
Nscale is another important target sample for the next-generation computing power cloud circuit. The cooperative customer base is highly coincident with industry peers, and is also exploring the viability of the business model. This prospectus provides the market with more reference data on the cost of computing power per megawatt, but each business model itself is different, and interpreting reserve order data also requires more background information.
Among them, the most notable one is that the prospectus disclosed the binding details of the “delivery as a prerequisite” clause in the contract between Nscale and Anthropic, which is of reference significance for investigating AI Labs' demands in computing power leasing negotiations.
Nscale's S1 file did not change the bank's valuation logic for related companies. In the US communications infrastructure sector, the bank gave CoreWeave an underperforming market rating, with a target price of 74 US dollars. The current pattern of tight supply in the data center market still objectively exists, and CoreWeave is also benefiting from this. However, it is predicted that with the gradual easing of the industry's computing power supply, the company will be one of the first to be impacted and affected the most. The bank valued it using a 25.5 times corporate value/profit before interest and tax (EV/EBIT) ratio.
In terms of the Bitcoin miner/emerging AI infrastructure sector, cryptocurrency mining companies have a total planned power resource reserve of about 32 gigawatts, and also have the operational capability to quickly deliver power-ready computer room shells, and occupy an advantageous position in solving the industry's “computing power delivery timeliness” problem. Over the past two years, mining companies have signed contracts with cloud giants, cutting-edge AI laboratories, next-generation computing power cloud vendors, and AI chip companies to export about 9 gigawatts of electricity production capacity, and have landed more than 20 transactions, with a total contract value of over 180 billion US dollars.
The bank's other ratings are as follows: TeraWulf (WULF.US) gives an outperforming market rating with a target price of $36; Cipher Digital (CIFR.US) gives an outperforming market rating with a target price of $32; IREN gives an outperforming market rating, with a target price of $32; Riot Platforms (RIOT.US) gives an outperforming market rating with a target price of $35; CleanSpark (CLSK.US) gave an outperforming market rating with a target price of $24; MARA Holdings (MARA.US) gave a simultaneous market rating, with a target price of $17.