Neocloud stocks fall after Musk predicts 'guppy-level death'
Elon Musk wrote on X that lenders have cut off companies reliant on AI data centers, deepening a month-long slide in CoreWeave, Nebius and Iren.
In brief
- Elon Musk wrote on October 25 that 200-plus neoclouds face 'guppy-level death'
- CoreWeave, Nebius and Iren fell more than 4% premarket, then trimmed losses to 2% to 3%
- CoreWeave and Nebius are down more than 30% over a month, and Iren is down 40%
Shares of CoreWeave, Nebius and Iren fell on Monday after Elon Musk wrote that more than 200 neoclouds, companies that rent out computing power for AI, face “guppy-level death and consolidation.”
The post added pressure to a sector whose investors already question heavy borrowing to buy Nvidia chips and build data centers, and whether the AI infrastructure buildout will generate returns. Musk’s SpaceX runs its own data centers and sells computing capacity, which makes it a direct competitor of the neoclouds.
All three stocks dropped more than 4% in early premarket trading before paring losses to between 2% and 3%, CNBC reported. “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, CEO of SpaceX and Tesla, wrote in a post on X on October 25. He added that some neoclouds would make it through, “but not many.”
Musk was replying to Chamath Palihapitiya, the founder of Social Capital, who argued in his own post on X that more computing capacity would sit partially stranded or in inventory in 2027 than currently forecast, earning less than its total cost of capital. Palihapitiya described 2027 as a turbulent year that would clear out bad bets and bring consolidation for a few companies.
Executives in the sector have defended demand. Nvidia CEO Jensen Huang, whose company has invested in several neoclouds, told CNBC at Nvidia’s GTC event in Berlin that demand for neoclouds was “off the charts” and that a shortage of working capital would be solved.
Marc Boroditsky, chief revenue officer at Nebius, told CNBC that his company was not carrying the kind of debt CoreWeave has and would sell out its 2027 capacity if it brought it online. Iren co-CEO Daniel Roberts said demand from customers had not changed.
Neocloud shares have fallen sharply over the past month, CoreWeave and Nebius by more than 30% and Iren by 40%. The sell-off began earlier in October, after the spread on CoreWeave’s five-year credit default swaps, contracts that pay out if a borrower defaults, reached levels generally seen as a sign of distress and the yields on its bonds climbed.
On October 25, Musk also said SpaceX had closed a $40 billion debt deal to pay for the chips it needs for its AI ambitions, though people familiar with the discussions told Bloomberg News that talks over pricing were still ongoing.