The cloud market is still dominated by hyperscalers like Alphabet, Amazon, and Microsoft, but a new trend is emerging – the rise of neocloud players catering to the growing demand for sovereign cloud solutions. This shift is driven by the need for more secure and private infrastructure to support artificial intelligence (AI) workloads.
As AI applications become increasingly prevalent, enterprises and governments are looking for ways to keep sensitive data within their jurisdiction. This has created a significant opening for new entrants in the market. While hyperscalers have launched sovereign offerings, many companies prefer to host their own AI clusters on-premises or rent from neocloud providers.
Neoclouds, also known as cloud players focused on compute resources and inferencing, are now serving not just GPU demand but also specific locations. The key reason behind this is the need for secure data processing, particularly when applying large language models (LLMs) to sensitive proprietary data. Enterprises want control over their data and computing environment, rather than relying on hyperscalers.
Industry research supports this trend, with 451 Research indicating that companies are choosing different providers for their AI workloads compared to their general-purpose cloud services. The sovereign cloud market is expected to grow at a CAGR of 36% over the next few years, reaching $169 billion by 2028.
Neoclouds have received significant investments, with around $10 billion allocated in 2024 alone. According to S&P Global Market Intelligence, there are currently around 54 neocloud players, mostly located in the US and Europe. Gartner predicts that half of multinational companies will have digital sovereignty strategies by 2029.
Manish Gulyani, CMO for Network Infrastructure at Nokia, notes that “there’s going to be a lot of disruption.” As the trend continues to evolve, neoclouds are poised to play a significant role in shaping the future of the sovereign cloud market.
Source: https://www.fierce-network.com/cloud/sovereign-ai-demand-shaking-cloud-market