Shares in CoreWeave, Nebius and Iren fell in early trading on Monday after Elon Musk wrote that most neoclouds will not survive. All three rebounded later in the day, as Arjun Kharpal reported for CNBC.
Neoclouds rent out AI computing power, mostly Nvidia chips, to other companies. Musk set out his view in a post on X on Sunday.
“As of the past few weeks, debt markets have almost entirely shut off access to money for any company that doesn’t have substantial revenue independent of AI data centers,” Musk wrote. “That means the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many.”
In the same post, Musk said SpaceX had closed $40bn of debt for GPUs. He added that SpaceX is investment grade and earns money from Starlink and rocket launches.
He was replying to Chamath Palihapitiya, the founder of Social Capital, who wrote that neoclouds are “disorganized and poorly capitalized”.
“2027 will be a turbulent year because it will clear out a bunch of wrong/bad bets. It will also be a consolidation year for a few,” Palihapitiya wrote.
Another X user suggested that Musk wanted to push neocloud shares down to buy the companies cheaply. Musk answered him, as Aditi Bharade reported for Business Insider.
“SpaceX is not buying any neoclouds. Pointless,” Musk replied.
A month of losses
CoreWeave and Nebius shares have fallen more than 30% over the past month, and Iren’s have fallen 40%, according to CNBC. The sell-off began when CoreWeave’s shares and bonds slid over its debt.
The same week, Gartner predicted that most neoclouds would fail by 2030.
Nvidia and the neoclouds push back
Nvidia, which has backed several neoclouds, says the problem is money, not demand. Its chief executive, Jensen Huang, told CNBC last week that demand for neoclouds is “off the charts”.
“The demand of the capital is much greater than the availability of the capital. That’s going to get solved,” Huang said.
Marc Boroditsky, Nebius’s chief revenue officer, told CNBC that Nebius is “not carrying the kind of debt” that CoreWeave is. He said Nebius would sell out its 2027 capacity if it brought it online.
CoreWeave told Business Insider’s Pete Syme that “the AI cloud market is not a monolith”. A spokesperson said lenders tell speculative capacity apart from businesses with contracted revenue and a record of delivery.