AI neocloud stocks slide as investors question debt-fueled growth model

CoreWeave shares fell 15% on Wednesday following social media posts, with continued declines Thursday as its bond yields and credit default swaps surged, reflecting investor concerns about the AI neocloud sector's viability. Neoclouds, specialized AI computing providers, face scrutiny over their business model and heavy debt, with CoreWeave's forward debt-to-equity ratio at 667-to-1. Gartner predicts over 80% of neocloud providers will cease independent operations by 2030 due to cost pressures and lack of differentiation. The sell-off extends to peers like Nebius and IREN, plus AI colocation firms, suggesting broader worries about return on invested capital. Investors question whether AI returns will arrive slower than expected, with CoreWeave seen as a bellwether for the sector's sustainability.