The neocloud stock rout continues as Elon Musk warns of 'guppy-level death'

• Shares in neocloud companies are falling over concerns about their levels of debt.
• CoreWeave and Nebius, two major public neoclouds, have seen their stocks drop sharply in recent weeks.
• On Sunday, Elon Musk questioned the sector, saying that “some will make it through, but not many.”

CoreWeave and Nebius have both fallen more than 30% over the past month, largely due to growing concerns about the debt they’ve taken on to build more data centers.

Soon after Monday’s open, shares in both companies were down a further 4%, while Iren, another publicly traded neocloud, fell 2%.

The declines follow a string of X posts from Musk on Sunday evening questioning the neocloud business model.

“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,” he said.

“That means the 200+ neoclouds are going to see guppy-level death and consolidation,” he added. “Some will make it through, but not many.”

Musk said that while SpaceX has closed $40 billion in debt to buy GPUs, his company makes money through Starlink and rocket launches.

Meanwhile, investors are worried that a slowing AI boom could leave debt-heavy neoclouds struggling to service their loans.

After one X user posted arguing that Musk was trying to drive down the share prices of neocloud companies to acquire them, Musk replied: “SpaceX is not buying any neoclouds. Pointless.”

Nvidia holds significant stakes in CoreWeave, Nebius, and other cloud-computing companies.

A CoreWeave spokesperson said: “The AI cloud market is not a monolith,” and that lenders distinguish between speculative capacity and businesses with contracted revenue and a record of delivery.

They added that the company is “already a market leader operating at scale” with expertise, which it sees as key for opportunities to finance further growth.

A recent Bernstein Research report analyzed thousands of planned US data centers and estimated that only about 35% of the announced capacity will be built.

“Press releases are cheap … concrete is not,” Bernstein analysts wrote in a research note.

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