CoreWeave selloff stokes fears over neocloud AI debt pile

The firms you've never heard of are now carrying tens of billions of pounds of debt to buy chips and lease data centres back to the biggest names in AI. BBC reporting groups them as 'neoclouds': CoreWeave, Nebius, IREN, Applied Digital, Nscale. Several started in crypto mining. Nebius came out of Yandex NV, Russia's equivalent to Google, which split off and rebranded in 2024.

The selloff began when Microsoft and Google forecast less AI spending than Wall Street analysts had projected. Shares in the neoclouds tumbled.

CoreWeave CEO Mike Intrator told investors the market was acting 'irrationally' and said the business model was sound. The analysts the BBC spoke to were less calm. 'There is just an enormous amount of spending getting injected into the system. It's an arms race,' said Melissa Otto, head of Visible Alpha Research at S&P Global. Charlie Dai, VP and principal analyst at Forrester, said the model carries 'greater financial risk' as spending outlooks shift, and expects at least three neocloud firms to be acquired soon. Gartner predicts 80% of them will stop operating independently by 2030. Elon Musk has put the number of neoclouds facing consolidation past 200.

The pressure is already showing up company by company. Microsoft walked away from a deal with the British neocloud Nscale, citing power supply constraints that could persist through 2030. Australia's Firmus shelved a planned public listing. 'They are definitely going to face collateral damage,' Bradley Tusk of Tusk Ventures told the BBC, if AI turns out to be a bubble.

Treasury Secretary Scott Bessent played the risk down, describing the neoclouds as 'a small component of the overall ecosystem.'