As Nscale submits its IPO application, Bernstein "diagnoses" AI computing power cloud: CoreWeave (CRWV.US) "underperforms the market," IREN (IREN.US) "outperforms the market"

According to The Zhihu Finance APP, UK-based AI computing power company Nscale officially submitted its S1 prospectus last Friday. This long-awaited document provides the market with a fresh benchmark for analyzing the business models, competitive advantages, and potential risks in the new generation computing power cloud (Neocloud) sector. Bernstein released a research report, benchmarking Nscale against key industry players such as CoreWeave (CRWV.US) and IREN (IREN.US), and evaluated the industry landscape and investment logic. The analyst maintains an Underperform rating on CoreWeave with a target price of $74, and an Outperform rating on IREN with a target price of $100.

The company lists CoreWeave, Nebius, Crusoe, and Lambda as its main competitors, and identifies SpaceX as an “emerging large computing power service provider.” In terms of common characteristics, both Nscale and CoreWeave are founder-led computing power cloud companies that originated from the crypto sector. Both companies have established business partnerships with Nvidia, Microsoft, and Anthropic, and their objectives go beyond basic GPU rentals as they seek to expand their service portfolios, with similar underlying development logic.

Differences in Scale and Capacity Expansion

Compared to its industry peers, Nscale is currently smaller in scale and its operating capacity is below that of CoreWeave at the time of its IPO. The company currently has about 25,000 active GPUs, with a total computing power of only 55 MW. Most of its new capacity relies on self-built data centers rather than leasing space from third-party hosts. Of its currently operational sites, 31% are leased, but among its projects under construction, 76% are self-built.

Among the companies covered in the research, IREN also follows a self-built capacity route; in contrast, the majority of CoreWeave's existing capacity comes from data center leasing. The self-build model allows for better control over project economics and asset residual value, but also increases capital investment and carries higher project execution risks. Overall, Bernstein favors the self-build model, though it is not guaranteed to be risk-free or always profitable.

Geographic Expansion

Unlike CoreWeave and IREN, which focus mainly on the US market, Nscale currently concentrates its operations overseas. Although more than half of its projects under construction are based in the US, once all capacity is completed, its international orientation will be significantly greater than that of CoreWeave and IREN (Nebius, which is not included in the coverage, also has abundant overseas computing power resources). This global layout is conducive to securing orders from sovereign clients. Nscale also believes that compared to the domestic US market, lower electricity costs in overseas locations will provide a substantial competitive advantage.

Financing Strategies

Similar to its peers, Nscale employs a comprehensive range of tools to support its business expansion, including equity financing, customer prepayments, equipment leasing, contract pledge debt, and project-specific data center financing. Nscale adopts an asset-backed, deferred-drawdown debt structure similar to CoreWeave, but entered the capital market earlier in its operations: it currently only has 55 MW of computing power in use, compared to CoreWeave’s 360 MW at the time of its IPO.

Additionally, the Ward County project will be amortized in batches according to customer payment progress, better matching assets and liabilities, but also increasing the sensitivity of business performance to project execution. Like many public and private computing power cloud providers, Nvidia provides guarantees and backstops for Nscale.

Benchmarking Insights and Key Reference Metrics

Nscale represents another important benchmark example in the new generation computing power cloud sector, with a customer base highly overlapping with industry peers and is similarly exploring the viability of its business model. This prospectus offers the market more reference data on the cost per megawatt of computing capacity, though differences in business models should be considered, and an understanding of order backlog data requires additional background context.

Of particular note is the disclosure of detailed provisions in Nscale’s contract with Anthropic regarding the “delivery as prerequisite” clause, which offers valuable insight into the requirements and expectations of AI labs in computing capacity leasing negotiations.

Nscale’s S1 filing has not changed Bernstein’s valuation logic for the relevant companies. In the US communications infrastructure sector, Bernstein rates CoreWeave as Underperform with a target price of $74. While current data center market tightness remains and benefits CoreWeave, Bernstein anticipates that as computing power supply gradually eases across the industry, CoreWeave will be among the first and most significantly affected companies. The firm applies a 25.5x EV/EBIT multiple for its valuation.

In the bitcoin mining/emerging AI infrastructure sector, crypto mining companies hold power reserves with a total planned capacity of roughly 32 GW and possess the operational capability to rapidly deliver powered and ready-made data center shells, placing them in a favorable position to address the industry's “computing power delivery timeliness” issue. Over the past two years, mining companies have contracted to provide approximately 9 GW of power capacity to cloud giants, frontier AI labs, new-generation computing power cloud providers, and AI chip companies, delivering more than 20 deals with total contract value exceeding $180 billion.

Other ratings from Bernstein are as follows: TeraWulf (WULF.US) rated Outperform with a target price of $36; Cipher Digital (CIFR.US) rated Outperform with a target price of $32; IREN rated Outperform with a target price of $100; Core Scientific (CORZ.US) rated Outperform with a target price of $32; Riot Platforms (RIOT.US) rated Outperform with a target price of $35; CleanSpark (CLSK.US) rated Outperform with a target price of $24; MARA Holdings (MARA.US) rated Market Perform with a target price of $17.