Concerns about the AI business resurfaced after shares of South Korean data center provider Elice (0158S0.KQ) plunged 32% on its first day of trading.
Elice, which leases AI computing capabilities, raised about $151 million as investor demand was about 400 times higher than the IPO.
However, the stock’s sharp decline highlighted investors’ concerns about valuations and long-term profitability, particularly if hyperscalers cut spending or borrowing costs rise further.
The focus on neocloud providers accelerated over the past week after a viral chart showing rising bond yields for Nvidia (NVDA)-backed CoreWeave (CRWV) highlighted concerns about the company’s heavily leveraged balance sheet and its ability to grow its business quickly enough to cover rising interest expenses.
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Closing: October 20 at 4:00:01 p.m. EDT
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CoreWeave stock rebounded Tuesday after a 25% decline last week. Peers Nebius (NBIS) and DigitalOcean (DCON) also rose slightly following the recent rout in the neocloud space.
While much of Wall Street has come out in favor of CoreWeave since the stock’s recent selloff, HSBC analyst Abhishek Shukla has set a $39 price target for the shares, about 34% below current trading levels.
Nvidia CEO Jensen Huang tried last Thursday to allay concerns about the company’s debt-heavy balance sheet by saying he was “optimistic” and that its “cost of capital is coming down.”
Ines Ferre is a senior economics reporter for Yahoo Finance.
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