Can Hyperscalers Cancel Neocloud Contracts Each Month?

Jordan Nanos says hyperscalers and large frontier labs signing neocloud contracts generally do not have a right to cancel every month and walk away. They sign five-year and six-year terms, take the full capacity, and agree to a set hourly rate and a total contract value.

Neocloud providers find the terms attractive because they have already secured land and power, built a site, and in some cases purchased the chips before the contract. The potential to slow down, pause, or cancel that Dylan Patel described applies more to self-build sites. Meta has massive campuses meant as a base load of capacity going into the future, and Meta can buy chips for them or leave an empty shell for years.

Construction costs, while very expensive, are a small percentage of the total cost of a new chip project. Concrete, steel, and walls are important and hard to finish, but on a dollar basis the HBM, the optics, and the GPUs are the bigger portion of the bill.