CoreWeave CRWV and Nebius stocks fell about 3% on Wednesday, even after comments from SpaceX executives boosted sentiment in the pre-market session.
The artificial intelligence infrastructure providers have come under pressure amid concerns about debt-funded expansion and a potential glut of computing capacity.
SpaceX chief Elon Musk said the company was receiving more requests for computing power than it could accommodate, reinforcing the argument that demand for AI infrastructure continues to outstrip supply.
“We are also, frankly, hounded relentlessly by every hyperscaler and by dozens of smaller companies to rent more of our compute. We could rent out our compute several times over if we said yes to everyone. That is just the situation here,” Musk said on the earnings call.
“It is ridiculous. I do not think we are going to have a demand issue here. I am not saying this will happen, it is not impossible that we will have a six-month payback period for compute next year,” he added.
SpaceX’s data centres and Grok agents also delivered stronger-than-expected profits in the third quarter, as the company shifts away from its traditional space business towards artificial intelligence, which now accounts for 52% of its income.
The reversal has added to the recent losses in the two stocks.
CoreWeave shares remained down about 27% over the past month, while Nebius had fallen approximately 26%, reflecting continued uncertainty over the financing and returns associated with the AI infrastructure boom.
CoreWeave also announced its CoreWeave Zero Trust AI Framework™ on Wednesday at NVIDIA GTC Berlin.
The customer-controlled security model allows customers to retain authority over access to their models, data and runtime environments, while bringing their existing security systems to CoreWeave Cloud.
Debt concerns continue to weigh on CoreWeave
The recent selloff reflects investors’ growing scrutiny of companies borrowing heavily to build data centres and expand computing capacity for AI developers.
Credit markets have reflected those concerns.
The yield to maturity on CoreWeave’s 9.625% bond due in 2032 reached 14.8%, while the yield on its 9.75% bond due in 2031 stood at around 14.9%.
The elevated yields indicate that investors are demanding substantial compensation for holding the company’s debt, adding to questions about the cost of financing its expansion.
A Gartner report has also raised concerns about the long-term viability of specialised AI cloud providers, commonly known as neoclouds.
“By 2030, Gartner predicts that cost pressure and a lack of a differentiating business model will force over 80% of neocloud providers to cease independent operations.”
The forecast has intensified debate over whether smaller computing providers can sustain their capital-intensive business models as competition increases and financing conditions become more demanding.
Wall Street remains divided over CoreWeave
Analysts have offered sharply different assessments of CoreWeave’s financial risks following the recent market turmoil.
JPMorgan said on Friday that the company’s financing requirements reflected the pace of its expansion rather than weak underlying project economics.
The bank pointed to strong demand for computing power and long-term take-or-pay contracts that secure customer commitments before new capacity becomes operational.
JPMorgan estimates that a typical five-year contract generates an unlevered internal rate of return in the mid-teens, above CoreWeave’s estimated blended cost of capital of 9%-11%.
“Beyond the sound economics on a project for a typical 5-year contract agreement, there is an additional monetization lever in recontracting GPUs beyond the 5-year duration,” the analysts added.
The bank also outlined how contract cash flows could help cushion the company against financing risks.
In a conservative scenario, capital spending accounts for about 51% of a five-year contract’s value, with approximately 80% financed through asset-level debt.
After repaying that borrowing, CoreWeave could retain cash equivalent to about 16% of the contract’s value, potentially covering roughly five years of data centre obligations even without renewing the agreement.
Goldman Sachs also upgraded CoreWeave to Buy from Neutral, arguing that investors may be overstating financing risks and underestimating the potential returns from its computing investments.
Analyst Gabriela Borges lowered her price target to $106 from $139 but continued to see substantial upside following the sharp sell-off.
HSBC Global Investment Research, however, maintained its bearish position.
The bank reiterated its Reduce rating and $39 price target, implying a potential downside of 36% from Monday’s closing price.
HSBC kept its earnings estimates unchanged, leaving them significantly below Wall Street consensus forecasts.
It cited debt market pressures and moderating revenue from large language models as factors exacerbating structural concerns.
The bank also argued that hyperscalers could generate substantially more revenue per megawatt of computing capacity because they offer capacity through more lucrative short-term contracts and operate differentiated general-purpose cloud businesses.
These services contrast with the more commoditised, graphics processing unit-focused infrastructure offered by neocloud providers.
Nebius highlights alternative financing model
Nebius also sought to distinguish its funding strategy from that of other AI cloud providers facing pressure over debt.
Chief Revenue Officer Marc Boroditsky told CNBC on Wednesday at Nvidia’s GTC Berlin conference that Nebius was less exposed to the market pressures affecting other providers because it did not carry the same kind of debt as CoreWeave.
He pointed to equity raises, convertible offerings and upfront customer payments as the company’s principal funding sources.
Nebius also consistently secured higher upfront payments from customers to support future capital expenditure.
Boroditsky cited SpaceX’s latest earnings as evidence of strong demand for AI computing capacity, saying computing supply “continues to fall far behind demand.”
He said Nebius could sell all its planned 2027 capacity immediately at current prices if it made that capacity available to its sales team.
The company is, however, deliberately retaining some capacity to meet future customer requirements.
Asked about 2028, Boroditsky said customers were seeking to secure capacity “further and further out,” suggesting that demand for computing infrastructure could remain strong beyond the next year.
The outlook has not prevented analysts from reassessing valuations across the sector.
Piper Sandler cuts Nebius PT; cites CoreWeave as preferred name
Piper Sandler analyst James Fish lowered his price target on Nebius by 22% to $185 from $237 on Wednesday while maintaining a Neutral rating, according to The Fly.
The firm cited concerns over AI demand, returns on invested capital, and financing after several AI cloud stocks suffered losses exceeding 25%.
Piper reduced terminal valuation multiples across the sector, warning that stocks could remain “in the penalty box” until free cash flow improves or financing becomes clearer.
Still, the firm recommended gradually building positions during the pullback and reiterated CoreWeave as its preferred name, describing financing concerns surrounding the company as overblown relative to its assessment.
The contrasting views underline the central question facing AI infrastructure stocks: whether long-term demand for computing capacity will generate sufficient returns to justify the borrowing and capital spending required to build it.
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