Nebius (NBIS.US) CEO admits new cloud company financing is becoming difficult; Musk warns “major reshuffling,” intensifying market concerns

According to Zhitong Finance APP, Nebius Group (NBIS.US) CEO Arkady Volozh has admitted that it is becoming increasingly difficult for neocloud companies to obtain debt financing. Meanwhile, market concerns about neocloud companies' business models and their reliance on leverage continue to intensify, putting pressure on the share prices of related companies.

A video clip of Volozh speaking at the Nvidia Berlin GTC conference circulated on X platform on Sunday. He stated that some sources of funding have temporarily dried up, including “asset-backed financing or debt markets,” but Nebius has sufficient funds to advance its planned capacity expansion projects.

“Our balance sheet is quite healthy, and we have always considered maintaining a more conservative posture in this regard,” Volozh said. “At the moment, however, we are operating through customer prepayments and several other instruments, which is likely to provide us with sufficient funding, at least to build this gigawatt-level facility.”

He made these remarks at a time when investor worries about the debt needed to support the industry's rapid expansion are intensifying. Neocloud service providers build and lease computing power infrastructure, mainly powered by Nvidia GPUs, for companies developing and running artificial intelligence (AI) models. This business requires significant upfront investment in chips and data centers, with returns depending on securing customers and generating enough revenue to cover financing and operational costs.

Nebius, which is backed by Nvidia, has been expanding capacity to meet two large contracts from Microsoft (MSFT.US) and Meta Platforms (META.US).

Musk Warns of Major Reshuffle in Neocloud Industry

Billionaire entrepreneur Elon Musk stated that the industry would experience “guppy-level death and consolidation,” and said that his rocket and AI company SpaceX has no intention of acquiring any neocloud companies. As a result, Nebius's share price fell 4% last week and continued to decline in after-hours trading on Sunday evening.

Musk noted that the debt market is reluctant to provide financing for companies whose revenues almost entirely depend on AI data centers, adding that while SpaceX has secured $40 billion in debt financing to purchase Nvidia GPUs, unlike new neocloud service providers, SpaceX also benefits from revenue from Starlink and rocket launch businesses. He concluded, “This means that more than 200 new neocloud service providers are facing large-scale demise and consolidation. Some companies will survive, but not many of them.”

AI critic and EZPR CEO Ed Zitron commented that these remarks were particularly ominous for CoreWeave (CRWV.US). “If that’s truly the case, aside from whatever solution Blackstone might come up with, CoreWeave is finished,” he wrote in a post on X.

Nebius Secures $3.5 Billion in Debt Financing for Expansion

Last Thursday, Nebius announced that it has secured $3.5 billion in debt financing from Citi to fund its data center expansion and GPU purchases. The loan matures in October next year and will be used for general corporate purposes.

This financing comes at a time when neocloud stocks are facing a broader market sell-off, as investors scrutinize the debt-heavy expansion plans of AI infrastructure providers.

“Prioritizing financing is how we optimize long-term capital costs,” said Nebius Chief Operating Officer Ofer Naveh. “We still have several sources of capital available to fund the next stage of growth,” he added, stating that the company has $40 billion in long-term customer contracts that can serve as collateral.

Retail Investors Remain Bullish on Neocloud Companies Amid Downturn

Neocloud companies including CoreWeave and IREN (IREN.US) ranked among the top trending stocks on Stocktwits on Sunday night, with retail sentiment indicators showing “bullish” attitudes.

“When it comes to Nebius, if you use your brain and carefully crunch the numbers, you’ll realize: anyone shorting this company over the next 12 months is simply going against their own wallet,” one trader remarked.

Nebius's share price has fallen about 33% so far this month, but is still up 90% year-to-date. CoreWeave’s share price has dropped 38% this month for a cumulative 24% decline this year; IREN’s share has fallen 39% this month and 34% this year so far.