Neocloud stocks tumble as investors question AI data centre debt
Shares in CoreWeave and other neocloud firms that lease AI computing power have lost about a quarter of their value in a month, the BBC reports. Gartner predicts 80% of these firms will cease independent operations by 2030.
Little-known data centre companies called neocloud firms are now at the centre of a debate over whether AI is a bubble, the BBC reported. The firms run large warehouses full of expensive computers. They lease that computing power to major AI developers such as Anthropic, OpenAI and Meta. CoreWeave stock has lost a quarter of its value over the past month, according to the BBC. Shares in Nebius, IREN and Applied Digital have fallen by about as much or more. Debt investors are also demanding higher returns from several firms in the sector. This past week, Microsoft and Google forecast lower AI spending than Wall Street analysts expected. Shares in several neocloud firms dropped after the forecasts. Neocloud firms often sign long-term lease contracts with big tech customers. They then borrow money using those contracts and the AI chips they buy as collateral, said analyst Cory Johnson of IPO research firm The Quiet Period. He said lenders sometimes weigh the creditworthiness of CoreWeave's customers, such as Microsoft or Meta, more than that of CoreWeave itself. Johnson said this helps explain how CoreWeave built up $35.1bn in debt. Analysts disagree on what comes next. Gartner predicts that by 2030, 80% of neocloud firms will "cease independent operations". Forrester expects at least three to be acquired soon…
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