Due to increasingly power intensive generative AI workloads, the world is short on compute. Yet despite ongoing construction and aggressive spending into the data center buildout, the market is still coming up short. Neoclouds are stepping in to fill a vital and critical gap in the AI revolution, offering a compelling opportunity for investors.
Aggressive Data Center Construction
According to the U.S. Census Bureau, data center construction spending has risen sevenfold, recently tallying at an annualized pace of just under $60 billion as of May 2026. This is 650% higher than the spending amount at the end of 2019.
Rising Inventory But No Capacity
Because of the rising construction spending, CBRE data indicates data center inventory (as measured by megawatts), has grown from 3,255 megawatts in 1Q’2023 to 7,807 megawatts in 1Q’2026, an almost 140% increase.2
Despite this incredible growth, there is virtually no data center capacity to spare. On average, data center vacancy rates across four primary U.S. markets have dropped sharply. In 2023, the average vacancy rate was 5.8%. At the end of the first quarter of 2026, the vacancy rate was 1.3%. In North Virginia, the largest U.S. data center market, the vacancy rate is 0.3% while doubling its megawatt output.
The Neocloud Opportunity
As we detailed in our recent blog Neocloud Companies Explained, neoclouds exist because demand for AI compute is outpacing the rate at which traditional cloud and hyperscalers can provide it.
Hyperscalers have been publicly documented as being some of the biggest customers for neocloud companies to-date. Meta Platforms (META) has significant contracts for GPU capacity, $21 billion with CoreWeave (CRWV) and up to $27 billion with Nebius (NBIS). IREN (IREN), a former Bitcoin miner, has converted its power sites and data centers to provide computing capacity and recently signed a $9.7 billion contract with Microsoft (MSFT). Meanwhile, other neocloud players like TeraWulf (WULF) are building the infrastructure for Anthropic to expand its compute with a 20-year lease at $19 billion.
Compute Ramp Up Underway
The deals above describe a long-dated, robust pipeline for compute. That's critically important, but it's only half the story. The other half is that most of this power isn't running yet.
Across the eight operators listed below, roughly 12,280 MW is under contract against about 1,800 MW live, a 14.7% live share. CoreWeave and Nebius have each contracted about 3,500 MW. CoreWeave has 1,000 MW of it live, or 28.6%. Nebius has 170 MW, or 4.9%. Core Scientific (CORZ) has the highest share at 35.3%. Hut 8 (HUT) and Cipher (CIFR) have no energized AI capacity at all.
In our view, the growth potential from energizing contracted power is the market opportunity for neoclouds. These operators get paid as capacity comes online, so every megawatt energized is a contract converting into revenue. Over the past twelve months, consensus next-twelve-month revenue estimates have risen from $8.8 billion to $19.9 billion for CoreWeave and from $1.1 billion to $8.0 billion for Nebius.
Compute is Coming
We believe the compute shortage isn't a cyclical squeeze, but rather a structural one. Demand is compounding faster than power, land and construction can deliver it. CBRE vacancy data says the existing footprint is approaching max capacity, a key catalyst for why roughly $158 billion of contracts has gone to independent operators instead of being absorbed in-house by the hyperscalers and traditional cloud providers.
In our view, that gap between contracted and live power is the structural opportunity itself: a multi-year backlog that converts into revenue as capacity energizes. The compute ramp up is happening across the industry, and capturing it means owning the companies building it.
Meet NCLD
Roundhill believes AI compute demand is outpacing supply, positioning neocloud companies to capture the shortfall. The Roundhill Neocloud ETF (NCLD) seeks to offer exposure to a targeted basket of neocloud companies, the companies contracting, building and energizing the capacity the AI buildout still needs. NCLD offers a single-ticker solution to investing directly in the neocloud opportunity.
Learn More about NCLD: https://www.roundhillinvestments.com/etf/ncld/
1CBRE: Global Data Center Trends 2026 https://www.cbre.com/insights/reports/global-data-center-trends-2026
Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus or summary prospectus, if available, with this and other information about the Fund, please call 1-855-561-5728 or visit our website at www.roundhillinvestments.com/etf/ncld/. Read the prospectus or summary prospectus carefully before investing.
Neocloud Companies Risk. Neocloud Companies may be subject to rapid changes in technology, intense competition, government regulation, and obsolescence risk. Securities of such companies may be subject to greater price volatility than securities of companies in other sectors, particularly over the short term. The prices of securities of companies in these industries may fluctuate widely due to competitive pressures, rapid product cycles, changes in the regulatory environment, and shifts in supply and demand dynamics. Many Neocloud Companies are relatively small and may have limited product lines, markets, financial resources, or personnel, making them more susceptible to business risks and adverse developments. Neocloud Companies may also be dependent upon government contracts or subsidies, which may be subject to cancellation, renegotiation, or delay in payment. Additionally, the success of Neocloud Companies may be contingent upon the broader adoption of related technologies, including artificial intelligence, cloud computing, data center infrastructure, and high-performance computing. A slowdown or disruption in the growth of these related sectors could materially and adversely affect the revenues and profitability of Neocloud Companies in which the Fund invests.
Line of Business Risk. Certain companies included in the Fund’s portfolio will be engaged in other lines of business unrelated to the development of Neocloud Companies products, and these lines of business could adversely affect their operating results. The operating results of these companies may fluctuate as a result of these additional risks and events in the other lines of business. Despite a company’s possible success in activities linked to its development of Neocloud Companies products, there can be no assurance that the other lines of business in which these companies are engaged will not have an adverse effect on a company’s business or financial condition.
Active Management Risk. The Fund is actively-managed and its performance reflects investment decisions that the Adviser and/or Sub-Adviser makes for the Fund. Such judgments about the Fund’s investments may prove to be incorrect. If the investments selected and the strategies employed by the Fund fail to produce the intended results, the Fund could underperform as compared to other funds with similar investment objectives and/or strategies, or could have negative returns.
Asia Risk. The Fund invests significantly in the securities of Asian issuers. As such, the Fund is subject to certain risks specifically associated with investments in the securities of Asian issuers. Many Asian economies have experienced rapid growth and industrialization, and there is no assurance that this growth rate will be maintained. Some Asian economies are highly dependent on trade, and economic conditions in other countries within and outside Asia can impact these economies. Certain of these economies may be adversely affected by trade or policy disputes with its major trade partners. There is also a high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of investors and financial intermediaries. Certain Asian countries have experienced and may in the future experience expropriation and nationalization of assets, confiscatory taxation, currency manipulation, political instability, armed conflict and social instability as a result of religious, ethnic, socio-economic and/or political unrest. In particular, escalated tensions involving North Korea and any outbreak of hostilities involving North Korea could have a severe adverse effect on Asian economies. Governments of certain Asian countries have exercised, and continue to exercise, substantial influence over many aspects of the private sector. In certain cases, the government owns or controls many companies, including the largest in the country. Accordingly, government actions could have a significant effect on the issuers of the Fund’s securities or on economic conditions generally. Recent developments in relations between the U.S. and China have heightened concerns of increased tariffs and restrictions on trade between the two countries. An increase in tariffs or trade restrictions, or even the threat of such developments, could lead to a significant reduction in international trade, which could have a negative impact on the economy of Asian countries and a commensurately negative impact on the Fund.
Depositary Receipts Risk. Depositary receipts may be less liquid than the underlying shares in their primary trading market. Any distributions paid to the holders of depositary receipts are usually subject to a fee charged by the depositary. Holders of depositary receipts may have limited voting rights, and investment restrictions in certain countries may adversely impact the value of depositary receipts because such restrictions may limit the ability to convert the equity shares into depositary receipts and vice versa. Such restrictions may cause the equity shares of the underlying issuer to trade at a discount or premium to the market price of the depositary receipts.
Concentration Risk. The Fund is concentrated in the industry or group of industries comprising the industrials sector and the information technology sector. The Fund may be susceptible to an increased risk of loss, including losses due to adverse events that affect the Fund’s investments more than the market as a whole, to the extent that the Fund’s investments are concentrated in the securities and/or other assets of a particular issuer or issuers, country, group of countries, region, market, industry, group of industries, sector, market segment or asset class.
Information Technology Companies Risk. Information technology companies face intense competition, both domestically and internationally, which may have an adverse effect on profit margins. Like other technology companies, information technology companies may have limited product lines, markets, financial resources or personnel. The products of information technology companies may face obsolescence due to rapid technological developments, frequent new product introduction, unpredictable changes in growth rates and competition for the services of qualified personnel. Companies in the information technology sector are heavily dependent on patent and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies. Information technology companies are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory action.
New Fund Risk. The Fund is a recently organized investment company with a limited operating history. As a result, prospective investors have a limited track record or history on which to base their investment decision.
Non-Diversification Risk. As a “non-diversified” fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent the Fund invests in a relatively small number of issuers, a decline in the market value of a particular security held by the Fund may affect its value more than if it invested in a larger number of issuers. The value of the Fund Shares may be more volatile than the values of shares of more diversified funds.
Swap Agreements Risk. The Fund may utilize swap agreements to derive its exposure to Neocloud Companies. Swap agreements may involve greater risks than direct investment in securities as they may be leveraged and are subject to credit risk, counterparty risk and valuation risk. A swap agreement could result in losses if the underlying reference or asset does not perform as anticipated. In addition, many swaps trade over-the-counter and may be considered illiquid. It may not be possible for the Fund to liquidate a swap position at an advantageous time or price, which may result in significant losses.
Roundhill Financial Inc. serves as the investment advisor. The Funds are distributed by Foreside Fund Services, LLC which is not affiliated with Roundhill Financial Inc., U.S. Bank, or any of their affiliates.