Nvidia-backed Firmus postpones Australian listing, casting a shadow over the queue of data center IPOs.

NVIDIA Corporation (NVDA.US)-backed data center company Firmus Grid Ltd.'s Australian IPO is expected to be postponed, an ominous signal for other companies planning to list. This comes after AI infrastructure companies have suffered a string of disappointing debuts. Firmus is reportedly set to decide to pause an IPO of up to $5.5 billion and instead consider raising more funds through private markets. Some investors had previously viewed the deal's pricing strategy as too aggressive. Over the past month, the U.S. 10-year Treasury yield has risen sharply, putting pressure on rate-sensitive sectors. Dave Mazza, CEO of Roundhill Investments, said the so-called "neocloud" companies that investors use to compare many of these firms, such as CoreWeave Inc. and Nebius Group NV, are among the most leveraged and volatile AI stocks. "The bear case is having its moment in the sun because the cost of capital has gotten out of control, long-duration stocks are getting hit, so the near-term setup is quite challenging," Mazza said. Several companies have slowed their pace after publicly filing with the U.S. Securities and Exchange Commission. Under the rules, companies must wait 15 days before launching a formal IPO roadshow. Although AI cloud provider Nscale Ltd. and SB Energy Inc., an AI data center and power infrastructure developer backed by SoftBank Group, filed for U.S. listings last month, they have yet to begin marketing their respective deals. Singapore-based DayOne Data Centers Ltd. publicly filed for a U.S. IPO earlier this week and, according to the schedule, could begin formally pitching to investors on October 21. People familiar with the matter said these companies all hope to find an issuance window while investors await a potentially large listing by frontier AI lab Anthropic PBC as early as November. "The bull case for these companies is that they can bring compute online faster than traditional cloud service providers, but these companies have extremely high price-to-sales ratios and need to issue debt to finance their businesses," said Mazza. His actively managed ETF includes the Roundhill Neocloud ETF. "If you're Nscale and you see what's happening with Firmus, that's not a signal that gives you confidence to price an IPO," he said. An Nscale representative declined to comment. The Roundhill Neocloud ETF, whose holdings include Nebius, CoreWeave and IREN Ltd., fell 7.2% on Thursday. AI Spending Surge According to market-compiled data, companies seeking to capture or participate in the surge in AI-related spending have helped drive two large deals, pushing the weighted average return for U.S. IPOs this year to 15%. The data excludes blank-check companies and other financial instruments. SpaceX's record $86.2 billion listing heavily emphasized its future AI-related businesses during marketing, and its shares have risen 19% since the IPO; the U.S. depositary receipts of South Korean memory chip maker SK Hynix have gained 14% since listing. By contrast, data center companies Csquare Inc. and Blackstone Digital Infrastructure Trust Inc. have fallen more than 15% each since their recent listings. Several so-called "picks-and-shovels" companies have also performed poorly after listing this year. These companies provide exposure to AI-related industry activity, such as heating, cooling and ventilation systems for data centers, or the power equipment that keeps data centers running. Even so, market research forecasts that generative AI spending will reach $2.3 trillion by 2032, with AI agent deployment alone accounting for about $286 billion. As AI usage rises accordingly, many investors still believe demand for data center compute will continue to grow. "There is indeed a lot of equity and debt financing in the market, but we think it's worth doing," said Tim Griskey, senior portfolio strategist at Ingalls & Snyder. "We think there is a lot of pent-up demand for data centers, and I don't think this will stop. It won't be smooth sailing, but there is a lot of growth ahead."