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Concerns over the AI trade resurfaced after South Korean data center provider Elice’s (0158S0.KQ) stock plunged 32% on its first day of trading.
Elice, which rents out AI compute capacity, raised roughly $151 million, with investor demand oversubscribing the IPO by roughly 400 times.
However, the stock’s sharp decline highlighted investor concerns about valuations and long-term profitability, particularly if hyperscalers curb spending or borrowing costs rise further.
The focus on neocloud providers gained steam over the past week after a viral chart showing Nvidia (NVDA)-backed CoreWeave’s (CRWV) spiking bond yields underscored concerns about the company’s debt-heavy balance sheet and whether it can scale its business quickly enough to cover rising interest expenses.
62.66 +1.53 (+2.51%)
As of 11:22:51 AM EDT. Market Open.
CRWV NBIS
CoreWeave stock rebounded on Tuesday after a 25% drop last week. Peers Nebius (NBIS) and DigitalOcean (DCON) also edged higher following the recent rout in the neocloud space.
While much of Wall Street has come out in defense of CoreWeave since the stock’s recent sell-off, HSBC analyst Abhishek Shukla slapped a $39 price target on the shares, about 34% below current trading levels.
Nvidia CEO Jensen Huang tried to ease concerns last Thursday about the company’s debt-heavy balance sheet by stating he was “optimistic” and that its “cost of capital is actually decreasing.”
Ines Ferre is a senior business reporter for Yahoo Finance.
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