Debt and falling shares fuel fears of an AI bubble in neoclouds

Neocloud firms finance the upfront purchase of chips and infrastructure by using long-term contracts with major customers as collateral, according to the BBC. CoreWeave has accumulated $35.1 billion in debt, while its shares and those of Nebius, IREN and Applied Digital have fallen by about a quarter or more over the past month. Analysts say the model carries greater financial risk if major technology companies reduce their AI spending.

Most of these firms grew out of cryptocurrency mining and benefited from rising demand for computing power after ChatGPT launched. The share declines intensified after Microsoft and Google forecast AI spending below Wall Street analysts’ expectations. The BBC also reports that Microsoft cancelled a deal with British neocloud Nscale over power-supply problems, while Australia’s Firmus shelved plans to sell shares to the public. Analysts say demand still exceeds supply, but Elon Musk predicts consolidation in the sector.