CoreWeave confronts 'doom cycle' narrative as neocloud credit risk overshadows growth
Leading neoclouds CoreWeave and Nebius have both lost about half their value in the past month as they get set for earnings reports this week.
After a tumultuous month for neoclouds that saw stock prices cut in half, investors are eager to hear how the leading companies in the space plan to navigate a tightening credit market and an unfavorable political environment.
CoreWeave is set to report quarterly results on Tuesday, followed by Nebius on Thursday. Both companies are reliant on debt to fund their purchases of cutting-edge artificial intelligence systems, but they're confronting a skeptical base of lenders as the AI trade sours on Wall Street.
The neoclouds had a particularly rough day last Thursday, suffering dramatic drops and contributing to the Nasdaq's steepest slump in 19 months. Leading chipmakers Nvidia , Advanced Micro Devices and Micron also plummeted on concern that raging anti-AI sentiment would further complicate buildout plans.
Nvidia, a major investor in a number of neoclouds, including CoreWeave and Nebius, faces its own fresh turbulence after CEO Jensen Huang admitted Sunday that he'd had an extramarital affair with a business executive who intelligence agencies say is a Chinese spy. That news could add further volatility to an already nervous market.
Democrats last week won governors' races in Georgia, Iowa, Nevada, Ohio and Texas, and voters rejected data centers in all but one of the 41 related measures on ballots across the country.
CoreWeave CEO Mike Intrator took to LinkedIn to try to temper investors' fears.
"We currently don't anticipate any impact to CoreWeave's existing customer commitments or associated backlog as a result of shifts in the political landscape," Intrator wrote.
But the market was unrelenting. Yields on some CoreWeave bonds maturing in 2031 jumped above 16%. The spread on its five-year credit default swaps, which are insurance against default, soared above 1,240 basis points, up 50% in the past month.
"I do agree completely that neoclouds in particular are going to be the most impacted," Anastasia Amoroso, chief investment strategist at Partners Group, told CNBC's "Closing Bell" on Friday. Unlike hyperscalers Amazon and Microsoft , the top neoclouds are unprofitable and heavily dependent on a small number of customers.
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- CNBC9 Nov, 13:00
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