Nebius (NBIS.US) CEO Acknowledges Growing Financing Difficulties for Neoclouds; Musk's "Major Shakeout" Warning Amplifies Market Concerns

Nebius Group (NBIS.US) CEO Arkady Volozh acknowledged that it is becoming increasingly difficult for neocloud companies to obtain debt financing. Meanwhile, market concerns about the business models and leverage dependence of neocloud companies continue to heat up, and the stocks of related companies are under pressure. Video clips of Volozh speaking last week during NVIDIA Corporation's GTC conference in Berlin circulated on X on Sunday. He said some funding sources have temporarily dried up, including "asset-backed financing or the debt market," but Nebius has sufficient funds to advance its planned capacity expansion. "Our balance sheet is quite healthy, and we have always considered taking a more conservative stance in this regard," Volozh said. "But we are currently operating through customer prepayments and several other instruments, which will likely provide us with enough funding to at least build out this gigawatt-scale facility." His remarks come as investor concerns mount over the debt needed to support the industry's rapid expansion. Neocloud providers build and lease computing infrastructure, which is mainly powered by NVIDIA Corporation GPUs, for companies developing and running artificial intelligence (AI) models. The business requires heavy upfront investment in chips and data centers, while returns depend on securing customers and generating enough revenue to cover financing and operating costs. Nebius, which is backed by NVIDIA Corporation, has been expanding capacity to meet two large contracts from Microsoft Corporation (MSFT.US) and Meta Platforms (META.US). Musk Warns Neocloud Industry May Face Major Shakeout Billionaire entrepreneur Elon Musk said the industry will see "guppy-level death and consolidation," and said his rocket and AI company SpaceX has no intention of acquiring any neocloud company. As a result, Nebius shares fell 4% last week and moved lower in overnight trading on Sunday. Musk said the debt market is unwilling to provide financing to companies whose revenue depends almost entirely on AI data centers, adding that SpaceX has already obtained US$40 billion in debt financing to purchase NVIDIA Corporation GPUs, but unlike neocloud providers, SpaceX also has revenue from Starlink and its rocket launch business. He concluded: "This means more than 200 neocloud providers will face massive death and consolidation. Some companies will survive, but not many." AI critic and EZPR CEO Ed Zitron said these remarks are especially ominous for CoreWeave (CRWV.US). "If that's really the case, CoreWeave is finished beyond whatever Blackstone can come up with," he wrote in an X post. Nebius Secures US$3.5 Billion in Debt Financing for Expansion Nebius said last Thursday that it had obtained US$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. The financing comes amid a broader selloff in neocloud stocks, as investors scrutinize the debt-heavy expansion plans of AI infrastructure providers. "Sequencing financing is how we optimize our long-term cost of capital," Nebius Chief Operating Officer Ofir Nave said. "We still have multiple sources of capital available to fund our next phase of growth," he said, adding that the company has US$40 billion in long-term customer contracts that can serve as collateral. Retail Investors Turn Bullish on Neocloud Companies Against the Trend Neocloud companies including CoreWeave and IREN (IREN.US) ranked among the top trending stocks on Stocktwits on Sunday night, with retail sentiment indicators all at "bullish." "Regarding Nebius, if you use even a little brainpower and carefully run the numbers, you'll understand: anyone shorting this company over the next 12 months is simply picking a fight with their own wallet," one trader said. Nebius shares have fallen about 33% month-to-date but are still up 90% year-to-date. CoreWeave shares have fallen 38% month-to-date and 24% year-to-date; IREN shares have fallen 39% month-to-date and 34% year-to-date.