After issuing a “Yikes” on the finances of neocloud gaming CoreWeave (CRWV) earlier this month, Elon Musk is taking on the entire industry with a harsher, more brutal view.
Some “more than 200” neoclouds will experience “death and consolidation at the guppy level,” Musk warned in a new post on X.
Musk said debt markets are reluctant to finance a company whose sales depend almost entirely on AI data centers. SpaceX took on $40 billion in debt to buy GPUs, Musk added. The funding is backed by top companies such as Starlink, Musk explained.
Shares of CoreWeave and Nebius (NBIS) fell 2.7% and 3.5% in pre-market trading Monday following Musk’s comments.
Two factors collided here for the neoclouds that sent the space into a mini free fall this month.
158.74 -0.43 (-0.27%)
Closing: October 23 at 4:00 p.m. EDT
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First, CoreWeave’s corporate bonds, regardless of maturity, continued to be abandoned due to fears of an AI slowdown and its implications for the company’s precarious balance sheet.
Second, in a new report, Gartner predicts that by 2030, “cost pressures and the lack of a differentiated business model will force more than 80% of neocloud providers to cease independent operations.”
“This move in CRWV is driven more by sentiment. It’s not about fundamentals. It’s not about them not being able to pay debt and so on. It’s more driven by sentiment and sentiment has to change. And what’s going to happen is, as always, there’s going to be a period of worry. And then the fundamentals will come into play, which is revenue, revenue growth,” the CRWV analyst told me. Bofa, Tal Liani, on Sozzi Unleashed, saying he maintains his aggressive policy. Price target of $140 on the stock.
Brian Sozzi is the editor-in-chief of Yahoo Finance, host of the Sozzi unleashed morning show, the ‘Powerful actors with Brian Sozzi podcast and member of the Yahoo Finance editorial leadership team.
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