Pressure on NEOCLOUD stock continues, with CoreWeave (NASDAQ: CRWV), Nebius (NASDAQ: NBIS), and IREN (NASDAQ: IREN) all declining by approximately 2.5% during Sunday night after-hours trading.
On Sunday, Musk warned that it has become harder for companies heavily reliant on AI data centers to access debt markets, and predicted widespread consolidation and failures in the industry.
Musk stated that the debt market has "almost entirely cut off access to funding for any company that does not generate substantial revenue outside of AI data centers."
This warning came after Musk stated that SpaceX had completed a $40 billion debt financing arrangement for Nvidia GPUs. He noted that SpaceX was able to secure the financing due to its investment-grade credit rating and established revenue streams from satellite internet and rocket launches.
Elon Musk further predicted that many neocloud companies will eventually disappear or merge with competitors, while ruling out the possibility of SpaceX acquiring any of them.
His remarks are particularly relevant to CoreWeave, Nebius, and IREN, three companies investing billions of dollars in AI computing infrastructure while heavily relying on external financing.
CoreWeave stock faces growing concerns over debt
The company backed by Nvidia has accumulated approximately $50 billion in debt, and yields on some of its bonds have risen to nearly 16%, reflecting investor concerns about its ability to finance future expansion.
Nevertheless, CoreWeave has secured significant customer commitments, including over $100 billion in revenue backlog as of the end of the second quarter. CEO Mike Intrator stated that contracted revenue is sufficient to cover debt obligations, though investors remain concerned about the timing of future cash flows.
Wall Street's outlook remains largely positive. With a consensus of "Moderate Buy" based on 21 buy, 5 hold, and 3 sell ratings, the average 12-month price target is $133.25, implying approximately a 146% upside from last Friday's closing price. (See CRWV stock forecast)
Nebius stock continued to face pressure through the difficult month of October.
Last Thursday, the company announced a $3.5 billion financing arrangement with Citigroup to fund data center construction and GPU procurement. This arrangement provides additional resources as Nebius works to fulfill its computational power delivery commitments under multi-billion-dollar agreements with Microsoft and Meta.
However, the company faces substantial spending requirements, with planned capital expenditures reaching tens of billions of dollars. This makes Musk’s warning particularly relevant, as Nebius must continue securing financing while bringing new computing facilities online.
Wall Street believes there is still significant upside potential, with an average analyst target price of $302.09, implying a 90% upside from last Friday’s closing price. Of the 13 analysts covering the stock, 9 recommend buying, 3 recommend holding, and only 1 recommends selling, resulting in a consensus rating of “Moderate Buy” for NBIS. (See NBIS stock forecasts)
IREN stock also faces its own financing challenges.
The company expects to spend $25 billion to $30 billion in fiscal year 2027, a significant commitment requiring substantial financial backing. Its strategy involves securing long-term AI computing contracts while expanding data center capacity and its GPU fleet.
IREN stated that customer prepayments and debt financing can cover most of its infrastructure expenses, although rising borrowing costs could make these plans more expensive.
However, Wall Street appears especially confident in IREN’s prospects, assigning it the strongest analyst consensus among the three stocks. With eight buy ratings and two hold ratings, IREN has a “Strong Buy” rating, and its average 12-month price target of $82.56 implies approximately a 231% upside from last Friday’s closing price. (See IREN stock forecast)
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