Bitcoin miners moving into artificial intelligence, including Riot Platforms, MARA Holdings, IREN and Core Scientific, have suffered share declines this month amid growing AI-bubble concerns. Riot fell to $12.53, the lowest price since April and 60% below this year's peak. Riot's valuation declined from more than $10.8 billion to $4.7 billion.
MARA fell to $7, the lowest price since February and 57% below the year-to-date peak. Core Scientific declined to $13.10 from a year-to-date peak of $30. IREN has also experienced heavy selling. Other neocloud companies, including CoreWeave, Nebius and TeraWulf, have fallen as concerns about the AI industry intensified. The AI Stock Bubble Index has risen to an elevated reading of 74.
The shares extended this month's declines after Gartner warned that neocloud companies will need to disclose substantial impairments in late 2030. Gartner's report highlighted a large shortfall between expected revenue and costs. Neocloud companies also face elevated credit risks because the companies use debt to finance AI expansion. A VanEck report released earlier this year estimated a $50 billion funding gap for Bitcoin mining companies pursuing AI. Rising memory, GPU and server costs will likely make the actual gap larger.
CoreWeave, the largest company in the neocloud sector, has seen the yield on the company's key 2031 bond rise to 15%. Investors have resisted efforts by Nvidia-backed Nscale and Firmus to enter public markets. Firmus had to withdraw the company's initial public offering. Nscale investors are asking Nscale to reduce the company's valuation to about $15 billion.
Increasing competition will likely weigh on neocloud companies' performance over time. SpaceX has emerged as a major competitor and has signed significant agreements with Alphabet, Anthropic and Reflection AI. Meta Platforms, another major neocloud customer, is considering entering the industry by renting out spare computing capacity.
These risks explain why many investors have taken short positions in neocloud companies. IREN's short interest stands at 20.7%. Core Scientific's short interest is 20.54%. Riot's short interest is 12.5%. MARA's short interest is 26%.