Companies are turning to alternative cloud options for cost-effective GPU access

The appetite for alternative clouds has never been bigger, with companies like CoreWeave leading the charge. This week, CoreWeave, a GPU infrastructure provider that started as a cryptocurrency mining operation, raised an impressive $1.1 billion in new funding. Investors such as Coatue, Fidelity, and Altimeter Capital contributed to the round, bringing CoreWeave’s valuation to $19 billion post-money.

But CoreWeave is not the only player in the alternative cloud space. Lambda Labs, Voltage Park, and Together AI have also secured significant funding in recent months, highlighting the growing demand for cloud-hosted GPU instances.

The driving force behind this enthusiasm for alternative clouds is generative AI. As the demand for hardware to run and train generative AI models at scale continues to rise, GPUs have become the go-to choice for developers and organizations. While major cloud computing providers like AWS, Google Cloud, and Microsoft Azure offer GPU instances, alternative clouds can often be more cost-effective and offer better availability.

Companies like CoreWeave provide a valuable alternative to hyperscalers, offering access to Nvidia GPUs at competitive prices. Even big tech firms like Microsoft have turned to alternative cloud providers to meet their compute capacity needs for training generative AI models.

However, the sustainability of this growth remains uncertain. As incumbents invest in custom hardware for AI workloads, alternative cloud providers may face challenges in competing on pricing. Additionally, the possibility of the generative AI bubble bursting poses a threat to the future of GPU-centric clouds.

Despite these challenges, analysts like Lee Sustar and Sid Nag anticipate a steady stream of upstart clouds in the market. With a focus on premium AI services and strong financial backing, alternative cloud providers have the potential to compete with established players in the industry.