Discover why Neoclouds are making data centre interconnect the backbone of AI-ready infrastructure.
For today's CIOs, CTOs, and CDOs, cloud infrastructure isn't just about IT; it's a critical strategic differentiator. In the era of AI factories, a new wave of cloud providers, Neoclouds are fundamentally reshaping how cloud environments are built. At the core of this transformation is the interconnect edge: the way data centres (DCs) connect to each other (DCI).
This article explains why optimising DCI isn't a technical detail, but a vital enabler for competitive advantage, operational efficiency, and risk reduction in our AI-driven world.
To help you navigate this critical shift, here’s a detailed overview of the key themes and insights covered in this article:
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Looking Ahead: Future Readiness and Strategic Considerations
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The Bottom Line: Interconnect Is Your Platform for AI Success
What are Neoclouds and Why Do They Matter to You?
Neoclouds are next-generation cloud platforms purpose-built for AI workloads. Unlike traditional hyperscalers, they’re engineered for what modern AI demands most: ultra-low latency, high-throughput GPU compute, and full data sovereignty.
They’re designed to:
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Rapidly scale from a few, to thousands of GPUs
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Deliver the speed and performance needed for real-time AI inference and massive model training
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Meet strict compliance requirements for sensitive data or regulated data
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Integrate seamlessly with edge environments across cities, industries, and applications
Pioneers like CoreWeave, Lambda Labs, SharonAI and GAIA-X aligned providers are leading the way with infrastructure optimised specifically for AI, not just cloud as usual, but cloud reimagined for what’s next.
And this shift is especially important for the Asia-Pacific region.
Across APAC, demand for powerful AI infrastructure is growing fast. Governments are investing in AI, businesses are scaling intelligent services, and there’s increasing pressure to keep sensitive data local and secure. Countries want more control over where their data resides, how it’s processed, and what energy powers it.
Neoclouds meet this challenge. They decentralise AI infrastructure (so it’s not locked into one global platform), deliver the performance needed for complex AI tasks, and follow local data and compliance laws. They bring the compute power of AI closer to where it’s actually used—whether that’s in hospitals, factories, finance, or smart cities.
Why Interconnect Now Leads Cloud Design
In traditional cloud models, network interconnects were an afterthought. In the era of Neoclouds, they’ve become the command centre of performance and a critical strategic asset. Whether you're training models, delivering AI-powered services in real time, or ensuring compliance with local data laws, your entire cloud strategy hinges on the quality of your interconnect fabric. Here’s why:
1. Latency: Your New Performance Edge
AI applications, especially real-time ones, are extremely sensitive to delays. Even a single millisecond can make the difference between success and failure. Neoclouds are fundamentally reshaping data centre interconnect (DCI) with “metro-spine” architectures: multiple high-density campuses linked across a city using fibre loops that deliver sub-millisecond speeds.
These links aren’t just failover options—they’re active, high-speed highways that allow distributed GPU clusters to operate in perfect sync
- Business Impact: Reducing AI inference latency by just 2ms can boost user engagement in real-time AI apps by 25-30%, directly increasing revenue per customer. In high-frequency trading, sub-millisecond advantages can mean millions in annual profit.
- Executive Insight: Prioritising ultra-fast DCI directly translates into faster AI, new service capabilities, and a tangible competitive edge for your organisation.
2. Throughput: Powering the AI Data Explosion
Training large AI models (like LLMs) creates an unprecedented volume of “east–west” data movement between compute and storage nodes often reaching many terabits per second. Legacy cloud interconnects weren’t built for this level of bandwidth.
To meet these demands, Neocloud infrastructure relies on:
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Guaranteed, non-blocking bandwidth (little to no jitter) to maintain predictable performance even during data floods
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Optical mesh or dark fibre: Providing the high-capacity, dedicated pathways needed.
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Programmable control: Using Software-Defined Networking (SDN) and DWDM (Dense Wavelength Division Multiplexing) to dynamically allocate network resources and adapt to changing AI workloads.
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Business Impact: Optimised throughput can cut LLM training cycles from 8 weeks to 4 weeks, accelerating new AI product launches by 50%. This means you capture first-mover advantage and stay ahead of competitors.
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Executive Insight: Maximising throughput drives faster AI development, more efficient resource use, and the ability to scale complex AI models without slowdowns – directly impacting your speed to market.
3. Sovereignty: Building Trust and Ensuring Compliance
Data sovereignty is no longer a niche topic; it's a top-tier boardroom issue across critical sectors. Data residency, transparent routing, and guaranteed jurisdiction are mandatory. This fundamentally changes how data centres and DCI are designed:
- Workloads must stay within legal borders, even if a system fails over.
- Traffic between sites must be auditable and predictable, giving you clear visibility.
- Data storage and replication need real-time compliance monitoring to prevent accidental cross-border movement.
To deliver this level of control, NeoClouds use “sovereign mesh” architectures—interconnected campuses operating as a unified, policy-driven regional cloud. This ensures full visibility, compliance, and resilience.
- Business Impact: Robust sovereign DCI prevents massive regulatory fines (e.g., up to 4% of annual revenue for GDPR breaches) and opens access to regulated markets worth billions. For finance, compliant DCI is often a prerequisite for licenses that unlock hundreds of millions in market access.
- Executive Insight (CDO/CIO): A strong sovereign DCI strategy is essential for regulatory compliance, managing geopolitical risks, and building deep trust with clients handling sensitive data. It protects your reputation and prevents costly penalties.
In Neoclouds, interconnect is no longer infrastructure plumbing, it’s your competitive infrastructure layer.
Get it right, and you unlock the full power of AI, securely and at scale.
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What's Driving This Strategic Shift?
The shift to Neoclouds isn’t just technical it’s economic, regulatory, and deeply strategic.
Cloud architecture is being redesigned not just to meet performance needs, but to control costs, manage compliance, and support mission-critical AI use cases in the real world.
Cutting Cloud Costs at the Source
Traditional hyperscalers often hit you with significant data egress (data leaving their cloud) and inter-AZ (data moving between their zones) transfer costs. For AI platforms moving petabytes weekly, these costs are unsustainable. Neoclouds use metro-local, high-throughput DCI to:
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Eliminate expensive long-haul data movement, significantly cutting operating expenses (OpEx).
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Minimise latency penalties in AI training and inference, optimizing performance per dollar.
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Improve the predictability of workload costs, leading to more stable and manageable budgets.
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Business Impact: Metro-local DCI can reduce data transfer costs by 60-80% compared to hyperscaler egress fees, boosting gross margins on AI services by 15-25%. For an organization processing 100TB monthly, this can mean $50,000-$200,000 in annual savings.
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Executive Insight (CIO/CFO): An optimised interconnect strategy directly improves your profitability by cutting unpredictable cloud spending and lowering the overall Total Cost of Ownership (TCO) for your critical AI infrastructure.
Designing for Compliance by Default
From Australia's Critical Infrastructure Act to Europe's GDPR and DORA, governments are tightening rules on where data lives and how it's handled. For Neoclouds serving regulated industries, compliance isn't optional. DCI must now support:
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Jurisdiction-specific routing rules: Ensuring data pathways meet local laws.
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Proximity controls: Keeping data within regulated zones.
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Zero-trust network overlays: Enhancing security by verifying every access request across zones.
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Executive Insight (CDO/CIO): Proactive DCI design for regulatory compliance is a strategic imperative that minimizes legal risks, strengthens data governance, and solidifies your position in regulated markets.
AI Use Cases That Demand a New Infrastructure
The shift is driven by real-world, high-stakes AI applications:
- National Health AI Exchanges: Need low-latency, jurisdiction-bound AI for real-time diagnostics, often requiring data to stay within a national health network.
- AI-Powered FinTechs (under APRA Regulation in Australia): Demand local storage, in-country redundancy, and observable connections for audits, making compliant metro clustering essential.
- Defence and Space AI: Mission-critical AI models in sovereign zones require zero cross-border data movement, yet need low-latency collaboration across secured sites.
These aren't future ideas; they are today's reality, shaping how cloud is built, sold, and governed.
The Evolution: From Central Hub to Sovereign Mesh
In the past, cloud infrastructure was built like a wheel, with a big, central hub in one place and “spokes” stretching out to other locations. Everything had to go through the centre—even if it meant longer delays or higher costs.
Today’s Neoclouds take a different approach. They use a “sovereign mesh”—a network of smaller, powerful cloud clusters located in major cities. These clusters are connected directly to each other, so data and AI workloads can move faster, stay local, and follow national data laws.
Think of it like a network of smart cities that talk to each other instantly, instead of always calling headquarters first.
| Legacy Cloud (Past Model) | Neocloud (Future-Ready) |
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| Centralised core regions | Distributed metro AI clusters |
| High-latency, spoke-based routing | Mesh-based, latency-first design |
| Availability Zones for redundancy | Interconnected AI zones for performance and control |
| Transit-focused networking | Throughput-first, programmable interconnect fabric |
When we talk about Data Centre Interconnects (DCI), we’re not referring to the cables and switches inside a single data centre. We’re talking about the high-speed fibre links that connect multiple data centres together—often across a city, region, or even international borders. These interconnects carry some of your most sensitive AI data in transit between sites.
And that makes them a growing target for cyber threats.
As AI workloads scale and data sovereignty becomes a board-level priority, protecting these interconnects is no longer optional, it’s foundational. Without strong DCI security, your most valuable assets, AI models, training data, and customer information—are at risk of being intercepted, manipulated, or stolen.
Here’s what robust interconnect security looks like today:
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End-to-End Encryption: Using robust encryption (like MACsec or IPsec) for all data in transit across DCI links, ensuring confidentiality.
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Advanced Threat Detection: Deploying AI-powered systems that constantly monitor DCI traffic for unusual patterns, insider threats, or attempts to tamper with AI models.
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DDoS Mitigation: Protecting critical DCI links from overwhelming cyberattacks to ensure continuous operation for your latency-sensitive AI workloads.
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Physical Security: Securing the physical fibre optic cables and network equipment connecting your data centres to prevent tampering or unauthorized access.
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Zero-Trust Principles: Applying "zero trust" across your DCI, meaning no user or device is trusted by default—every access request is verified, regardless of its origin.
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Organisation Impact: Comprehensive DCI security prevents costly data breaches (averaging $4.45 million) and protects invaluable AI intellectual property (models, training data) worth potentially billions in competitive advantage.
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Executive Insight (CTO/CDO): Robust DCI security isn't just about compliance; it's a proactive strategy to safeguard your AI assets, customer data, and ensure continuous business operations against sophisticated cyber threats.
ESG and the Interconnect Edge: Sustainable High Performance
Beyond simply reducing the need for long-distance fibre, an optimised interconnect edge contributes significantly to your broader ESG (Environmental, Social, and Governance) goals:
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Reduced Energy Consumption: Minimizing data travel distances and optimizing network paths reduces the energy consumed by network equipment. More efficient cooling for high-density AI infrastructure further contributes.
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Efficient Resource Utilisation: An intelligent, programmable interconnect fabric ensures your computing and storage resources are used optimally, cutting down on wasted capacity and energy.
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Supply Chain Resilience: Strategically placing interconnected facilities helps NeoClouds build more robust AI compute supply chains, reducing reliance on single regions or complex, long-distance logistics.
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Organisational Impact: ESG-optimized DCI can reduce energy consumption by 20-30%, improving sustainability metrics that are increasingly vital for attracting investors and environmentally conscious clients. This is especially true in B2B markets where ESG compliance is becoming a key procurement requirement.
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Executive Insight: Investing in ESG-aligned DCI enhances your sustainability profile, which is crucial for attracting top talent, responsible investors, and forward-thinking clients. It's about achieving high performance responsibly.
Looking Ahead: Future Readiness and Strategic Considerations
The landscape is constantly evolving. As Neocloud executives, consider these strategic points:
- More Automation: The need for dynamic, real-time workload placement will push DCI orchestration platforms to become even smarter, potentially using AI for network optimization.
- Edge Computing Integration: As "far edge" computing grows, the need for seamless, low-latency DCI to handle data from vast numbers of distributed devices will intensify.
- Interoperability Challenges: As the Neocloud ecosystem expands, ensuring smooth, secure connections between different Neocloud providers and even traditional clouds via DCI will become a strategic necessity. This will require industry collaboration and common standards.
- Talent Investment: The complexity of these advanced interconnect fabrics means you'll need specialized network architects and engineers. Strategic investment in training and talent acquisition is crucial.
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The Bottom Line: Interconnect Is Your Platform for AI Success
Neoclouds aren't just building inside data centres; they are building across them. The new cloud isn't regional; it's focused on metro areas. It isn't centralized; it's built around data sovereignty. And it doesn't just scale by adding racks; it scales by intelligently optimizing the network mesh.
For Neocloud executives, understanding and investing in a superior interconnect edge is no longer an option, it's a fundamental requirement. It is the platform upon which you will deliver AI-grade performance at sovereign scale, across every metro, every workload, and every regulation. The business impact is clear and measurable: reduced costs, faster time-to-market, enhanced compliance, and sustainable competitive advantage.
Ready to Future-Proof Your AI Infrastructure?
SharonAI already has.
They launched a sovereign, scalable GPU-as-a-Service platform with 100% uptime across Australia—powered by NEXTDC's high-performance infrastructure.
Now it's your move.
📩 Speak with our sales team to schedule a tailored infrastructure strategy session.
Or
📖 Read the SharonAI success story to see what’s possible when AI meets purpose-built infrastructure.
About NEXTDC
NEXTDC is Australia's leading data centre solutions provider, operating a network of Tier III and Tier IV digital infrastructure platforms across all major capital cities. As the only provider with fault-tolerant, Tier IV certified facilities in multiple locations, NEXTDC offers 100% uptime guarantees, sovereign compliance, and seamless interconnection with more than 750 cloud, carrier, and IT service providers.
With a mission to power, secure, and connect the digital economy, NEXTDC is at the forefront of enabling Australia's sovereign AI future, next-generation cloud, and high-performance compute environments for the most demanding workloads, including those optimised through NVIDIA DGX-Ready certification.
