Leading AI neocloud providers CoreWeave, Inc. (ASX: CRWV) and Nebius have both seen their market values nearly halve over the past month, with earnings reports from both companies due this week.
Yields on some CoreWeave bonds have climbed above 16%.
Last week's midterm election landslide for Democrats has further intensified market uncertainty about the pace of AI compute buildout.
After a fresh wave of selling across the neocloud sector, share prices have been cut in half. Investors are eager to know how the sector's leading players plan to cope with tightening credit and an unfavorable policy environment.
CoreWeave, Inc. (ASX: CRWV) will release its quarterly results on Tuesday, with Nebius (NBIS) following on Thursday. Both companies rely on debt to purchase cutting-edge AI compute equipment, and as Wall Street's enthusiasm for AI trades cools, lenders are becoming more cautious toward them.
Last Thursday the neocloud sector was hit hard, with share prices plunging sharply, dragging the Nasdaq to its largest single-day drop in 19 months. Leading chipmakers including Nvidia, AMD and Micron fell in tandem, as the market worries that rising anti-AI sentiment will make compute expansion plans more difficult.
Nvidia has invested in several neocloud providers, including CoreWeave, Inc. (ASX: CRWV) and Nebius, and has itself run into fresh trouble: CEO Jensen Huang was reported on Sunday to have had an extramarital affair, with the woman involved identified by U.S. intelligence agencies as a Chinese spy. That news had already made the market nervous and could amplify volatility further.
CoreWeave vs Nebius: One-Month Performance
Democrats won governor races last week in Georgia, Iowa, Nevada, Ohio and Texas; among 41 data-center-related ballot measures nationwide, several were rejected by voters.
CoreWeave CEO Mike Intrator posted on LinkedIn to calm market panic: "We currently expect that changes in the political landscape will not have any impact on CoreWeave's existing customer orders or its backlog."
But the market was not convinced. Yields on some CoreWeave bonds maturing in 2031 have surged above 16%; the spread on 5-year credit default swaps (CDS) used to hedge default risk has breached 1,240 basis points, a 50% increase in a month.
Anastasia Amoroso, chief investment strategist at Partner Group, said Friday on "Closing Bell": "I completely agree that neocloud providers will be hit the hardest." Unlike hyperscalers such as Amazon and Microsoft, leading neocloud companies are not yet profitable and have highly concentrated customer bases.
Another smaller listed neocloud provider, IREN, reported earnings Thursday evening: a large portion of its backlog is tied to Microsoft. However, it disclosed that AI cloud revenue doubled quarter over quarter, easing market anxiety to some extent, and its shares jumped 20% on Friday, recovering all of Thursday's losses.
IREN co-CEO Daniel Roberts said: "There is a disconnect between what the secondary market is showing and the customer demand we see on the front lines." But he also acknowledged the pressure from capital markets. "In recent weeks the capital markets have become more selective; the question is no longer how big the contract is, but whether orders can be delivered, whether funding can be secured, and whether projects can operate profitably." The company currently carries $10 billion in debt.
"How to Fill the Financing Gap"
Luke Yang, an analyst at Morningstar who tracks CoreWeave, said that as of the end of June, CoreWeave, Inc. (ASX: CRWV) held $5.5 billion in cash while carrying substantial debt. The latest SEC filings show: a $1.3 billion loan at a 15% interest rate maturing in March 2028; and another $3.2 billion debt at an 11% interest rate maturing in August 2030.
Luke Yang believes CoreWeave's short-term bankruptcy probability is not high, and its existing funds are sufficient to complete delivery of existing contracts; but expansion over the next five years will still require continuous financing. "If it wants to raise funds through additional share issuance, the current share price is very unfavorable — the stock has already fallen sharply. I will focus on what management says about how they plan to fill the funding gap." He is also watching the entire neocloud sector: the UK's Nscale filed for an IPO in September but has not updated its prospectus since. "Now is not a good time for it to go public." SB Energy, which filed listing materials in early September, is in a similar position, and Australian neocloud provider Firmus also submitted an IPO application last month.
In an internal memo from October seen by reporters, Intrator wrote to employees that market uncertainty is bad for the company: "But these peers want to raise enormous amounts of capital without CoreWeave's already-proven delivery capability, revenue scale and software solutions."
Investors remain cautious. Paul Meeks, head of technology research at Liberty Capital Markets, said Thursday on "Lunchtime" that the market narrative has become extremely negative: "This is unfortunate, and it creates a self-fulfilling prophecy — a death loop. If creditors worry that CoreWeave cannot repay its debts, then to borrow more to expand AI infrastructure it will have to accept extremely high financing rates." In 2025 CoreWeave's revenue was $5 billion. Meeks estimates revenue could surge to $42 billion by 2028, with an EBITDA margin approaching 70% that year. "If the company can stay on this path and the market recognizes this outlook, only then will everyone stop worrying about its debt and debt-servicing capacity."
LSEG consensus estimates: CoreWeave, Inc. (ASX: CRWV) latest quarterly revenue is expected to rise about 160% year over year to $3.55 billion; Nebius revenue is expected to grow to six times its previous level, about $908 million. Meeks expects the two earnings reports to give the market some breathing room.
In Meeks' view, the key is to restore capital markets' belief in the neocloud growth story and in the eventual arrival of profitability. "A bank may be fundamentally sound, but if there is a broad run on it in the market, it will still get into trouble. So I would not underestimate credit risk."
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