Neocloud companies are reporting some of the best financial results this year as the artificial intelligence boom accelerates. Despite this, Wall Street traders are betting against some of the top names in the industry, like CoreWeave, Nebius, and IREN.
CoreWeave, Nebius, and IREN short interest is rising
Data shows that the short interest of some of the fastest-growing neocloud companies has remained at an elevated level this year. That is a sign that investors expect that these stocks will ultimately drop in the coming months.
CoreWeave, the largest of them all, has a short interest of 14%. Similarly, IREN has a short interest of 16%, while Nebius sits at 20%.
CoreWeave, IREN, and Nebius stocks | Source: TradingView
The same is happening among companies seeking to enter the industry. For example, MARA Holding’s short interest has soared to 26%, while Riot Platforms soared to 17%.
For now, there are signs that short-sellers are losing as most of these stocks have jumped in the past few days. While the CoreWeave stock price has pulled back from its highest point this month, it remains 50% above the April low.
Nebius stock has jumped by 163%, while IREN is up by over 72%. MARA Holdings and Riot Platforms have jumped by over 90% and 105%, respectively.
Strong growth, but dilution risks persist
Neocloud companies have become some of the fastest-growing companies in the United States. For example, analysts expect that CoreWeave’s revenue will jump by 146% this year to $12.7 billion, followed by $24.9 billion in the coming year. This growth is happening because of its large deals with companies like OpenAI, Anthropic, and Microsoft. Its revenue backlog stands at nearly $100 billion.
Analysts also expect that Nebius’s annual revenue will jump by 549% this year to $3.4 billion. It will then jump by 220% in the next financial year to $11 billion, helped by deals by Microsoft and Meta Platforms.
IREN is also expected to do the same, with its revenue expected to hit $770 million this year and $3.22 billion next year. It reached a $9.7 billion with Microsoft last year.
The main concern among analysts and investors is that these companies are spending billions of dollars ramping up their data centers. By doing this, these firms are dramatically boosting their debt and also diluting their shareholders along the way.
A good example of this is CoreWeave, which plans to spend between $30 billion and $35 billion in capital spending this year. Its debt has jumped from over $8.2 billion in 2024 to nearly $30 billion today.
IREN, on the other hand, boosted its debt from $964 million last year to $4.3 billion today. Nebius’ borrowings have soared to over $4.1 billion.
This borrowing and dilution will continue as the cost of GPUs and other memory chips continues to rise this year.
The other main concern is their depreciation as AI chips gets more advanced. Analysts fear that these firms will need to depreciate these chips as they buy new models. For example, CoreWeave’s depreciation rose to $1.1 billion in Q1 from $443 million last year.
Similarly, Nebius’ depreciation rose from $49 million to $212 million in the same period. On the other hand, these companies argue that their core GPUs will be more valuable in the future because of the rising demand.
At the same time, the companies and their proponents argue that the soaring debt and dilution are justified. They point to companies like Tesla, Google, and Facebook that made huge losses before turning a profit.
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