These firms you've never heard of are feeding fears the AI bubble could burst
Summary
Neocloud firms that rent computing power to major AI companies face falling share prices and rising borrowing costs as investors question their debt and dependence on a few large customers. Their outlook is tied to continued AI spending by companies such as Microsoft, Google, Anthropic and OpenAI.Key Facts
- Neocloud firms operate large data centers and lease computing capacity to AI developers and other major technology companies.
- These firms often borrow against long-term customer contracts and the AI chips they buy.
- Analyst Cory Johnson said CoreWeave had accumulated $35.1 billion in debt.
- CoreWeave shares fell about a quarter over the month, while shares in Nebius, IREN and Applied Digital fell by similar amounts or more.
- Gartner analysts predict that 80% of neocloud firms will stop operating independently by 2030; Forrester analysts expect at least three may soon be acquired.
- CoreWeave, IREN, Core Scientific and Applied Digital began in cryptocurrency mining before expanding into AI infrastructure.
- Microsoft and Google recently forecast lower AI spending than Wall Street analysts expected, and shares in several neocloud firms fell.
- Treasury Secretary Scott Bessent called neocloud firms a small part of the overall AI ecosystem.
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