After issuing a “Yikes” on the finances of neocloud play CoreWeave (CRWV) earlier this month, Elon Musk is out with a more brutal hot take on the entire industry.
Some “200+” neoclouds are going to see “guppy-level death and consolidation,” Musk warned in a new post on X.
Musk said debt markets are hesitant to finance any company that relies almost entirely on AI data centers for sales. SpaceX has secured $40 billion in debt to buy GPUs, Musk added. The funding is backed by better businesses such as Starlink, Musk explained.
Shares of CoreWeave and Nebius (NBIS) fell 2.7% and 3.5% in pre-market trading on Monday on Musk’s comments.
Two factors have collided here for neoclouds that have sent the space into a mini tailspin this month.
153.27 -5.47 (-3.45%)
At close: October 26 at 4:00:01 PM EDT
152.50 -0.77 (-0.50%)
First, CoreWeave’s corporate bonds across maturities continued to be dumped amid fears of an AI slowdown and its implications for the company’s precarious balance sheet.
And second, in a new report, Gartner forecast that by 2030, “cost pressure and a lack of a differentiating business model will force over 80% of neocloud providers to cease independent operations.”
“This [move in CRWV] is more sentiment driven. This is not about fundamentals. This is not about them not being able to pay for the debt, et cetera. This is more sentiment driven and the sentiment needs to change. And what’s going to happen is, as always, there’s going to be a period of concern. And then the fundamentals will kick in, meaning revenues, revenue growth,” Bofa analyst Tal Liani told me on Sozzi Unleashed, saying he stands by his aggressive $140 price target on the stock.
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the Sozzi Unleashed morning show, the ‘Power Players With Brian Sozzi’ podcast and a member of Yahoo Finance’s editorial leadership team.
Source: finance.yahoo.com
