3.2 Demand concentration and the market risk The demand structure of the AI market reinforces dependence on the incumbent players. The key‘demand sink’ of current AI compute providers has been hyperscalers themselves and some of the leading AI labs that provide high-volume, long-term demand for computation capaci­ty. 19 This is reflected in the revenue contributions of hyper­scalers to neoclouds. For example, 62–77 % of CoreWeave’s $5.25 bn revenue is made up of Microsoft contracts and providing AI compute for OpenAI(Zitron 2025). Across the board, removing Microsoft, Amazon, Google, OpenAI and Nvidia’s contribution to CoreWeave, Nebius and Lambda Cloud’s revenue leaves only$1 bn in combined revenue (Zitron 2025). Other sources of demand are often compara ­tively more uncertain and fragmented to provide sufficient certainty for future cash flows. 20 This parallels broader trends in the AI economy, where any paths to profitability are closely tied to large American tech companies . This binds the nascent neocloud market to the demand and incentive ecosystem that surrounds the hyperscalers. The rapid depreciation of AI chips exacerbates the demand problem (Martindale 2025). High hardware costs and related capital expenses for infrastructure require a consistently high utilisation rate to recoup the invest­ment. Beyond the initial procurement of chips, the pres­sure to keep pace with rapid refresh cycles shortens the window in which profit must be generated, driving up the required utilisation rate even further. 21 For instance, if a$40,000 GPU becomes technically obso ­lete in just two years, a provider must ensure it is running billable workloads nearly 24/7 just to break even before the next generation arrives. This has led to the prevalence of long-term‘take-or-pay’ contracts to ensure predictable cash flows; that, in turn, bolsters the financial dominance of existing hyperscalers, as they are one of the few parties that can agree to guarantee 24/7 demand for workloads several years in advance. The volume of demand from reg­ulated industries – such as defence, finance and healthcare – that form the primary target market for sovereign spe ­cialised providers is unlikely to be sufficient to amortise these hardware costs in a rapid obsolescence cycle, creat­ing a systemic competitive disadvantage. In addition, the financing mechanics create sustained scale benefits that favour incumbent players in the glob ­al AI cloud market. While hyperscalers have largely fund­ed their AI infrastructure buildout from cashflows, neo­cloud providers fund their investments through asset­backed debt and project finance(Lopatto 2025). This means that they often have high interest rates to contend with. The financing structure makes the alternative neo­clouds more sensitive to demand fluctuations. If the AI cycle starts slowing down, the demand fails to materialise or the neoclouds are unable to capture value, alternative AI cloud providers are likely to experience cash-flow issues. This is particularly concerning given the unproven profita­bility of genAI applications that are driving demand for this infrastructure(Brennan, Kak& Myers West 2025). This is unlike hyperscalers, which will be able to balance demand fluctuations across their other, profitable busi­ness segments and absorb cyclical changes in their bal­ance sheets. This gives them the potential to scoop up the competition when the market consolidates. 3.3 Supplier concentration and the Nvidia risk Against these structural pressures, Nvidia is propping up this ecosystem, posing a concentration risk. In order to diversify demand sources for its highly sought-after AI chips away from hyperscalers and encourage competition in the ecosystem, Nvidia has been eager to partner with and cultivate alternative ecosystems. As such, Nvidia has indirectly become a geopolitically salient partner for Euro­pean parties with technological sovereignty aspirations. Nvidia has forged numerous strategic partnerships with actors in our ecosystem, with 385 partners in the EMEA market. In our analysis, based on data collected in Novem­ber 2025, we noted that~ 78 % of the alternative AI cloud providers have strategic partnerships with Nvidia, secur­ing preferential access to the chips and, in some cases, receiving equity investments from the company. This entrenches demand for Nvidia chips that is enforced in several ways: providers like CoreWeave are financed by Nvidia, enabling them to purchase Nvidia chips, which have since been used as collateral to purchase more Nvid­ia chips(Lopatto 2023). This aligns with previous research on the contemporary importance of Nvidia in the tech economy as a key background facilitator and ultimate beneficiary of the latest epoch of AI buildout. Nvidia has been embedding its current market position in several ways, for instance by: investing in leading European AI labs(Iyer 2025; Gerlat 2025; Thole 2025); partnering with European VC funds like Accel, Elaia, Partech and Sofinnova Partners(Nvidia 2025), as well as top European companies such as Nokia(Nokia 2025), Deutsche Telekom(Deutsche 19  As to the potential lack of demand for the Gigafactories in the EU, see Hess& Sieker 2025, and Renda& Kyosovska 2025. 20  Note here that, in some cases, the larger companies will contractually agree to offtake capacity from the neoclouds. For instance, Nvidia has agreed to buy off all the unused compute capacity from Coreweave as a way to generate stable demand(Lopatto 2025). This is also a way to compete on the hardware side. For instance, we believe Google’s provi­sion of offtake agreement to Fluidstack has to do with the effort to convince the company to use Google-made TPUs(Huang, Clark& Jin 2026). The offtake agreements become the implicit backstops for neoclouds, pointing to the importance of long-term contracts in structuring the incentives of different actors. 21  Many of the GPU providers argue that trailing edge chips have a long life cycle, as they can be used for less computationally cutting edge operations. For a discussion of those claims, see Butler 2025. 20 Friedrich-Ebert-Stiftung e.V.