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Listen to this article in summarized format The $750 million data center and AI developer became the latest sign of the waning faith in so-called neoclouds when it tanked 32% on its debut in Seoul. It joined a half-dozen other companies in the sector that just over the past few weeks have shown souring sentiment on artificial intelligence. Australia’s Firmus Grid Ltd. and AirTrunk have delayed public offerings, Britain’s Nscale Ltd. and US peer SB Energy Inc. faced investor pushback on their valuations, and CoreWeave Inc.’s bond yields shot up to 15%. In a sharp reversal from the broad-based pile-in of recent years, global markets are now being much more selective and demanding with AI bets. Neoclouds, the firms that specialize in running dedicated facilities for AI computation delivered over the internet, are an essential part of the supply chain that customers like Anthropic PBC and OpenAI tap in multibillion-dollar deals for capacity. But worries about financing, delays in data center construction and the uncertainty of returns have jolted the entire tech ecosystem, triggering the longest losing streak in semiconductor stocks since the global financial crisis. “Elice’s disastrous debut is another confirmation that the era of ‘buy everything AI’ has given way to ‘question everything AI,’” said Hebe Chen, senior market analyst at Vantage Global. Neoclouds are particularly vulnerable. New Jersey-based CoreWeave is the best known among them, pioneering the business model of taking on significant debt to load up on Nvidia Corp. graphics processing units (GPUs) that it later rents out in multiyear contracts. Its 18 months in public markets have shown the wild swings of confidence in this strategy: the company’s market value approached $90 billion last year, with Nvidia a vocal backer and investor, but it’s endured a brutal selloff since then and is now more than 60% off its peak. Read more: US stocks today: US stocks end higher as healthcare stocks lift Dow, tech a breather Firmus’ initial public offering valuing it at $30 billion collapsed, while Nscale is facing investor skepticism on a listing at a similar valuation. The two have run into the real-world challenges of converting AI computing demand and orders into functional operations, as both have only a small fraction of their planned data center capacity live. As the cost of capital increases, investors are becoming more wary of companies depending heavily on future revenues. One of the world’s most enthusiastic investors in AI, SoftBank faces pressure on several fronts. Its largest holding is a significant stake in OpenAI, which already pushed its IPO into next year, and the SB Energy debut was designed to help it raise funds to support its construction projects in the US. SoftBank pushed through the largest corporate junk-bond offering on record last month, raising roughly $11 billion, shouldering yields it’s never had to pay before. Its credit-default swap level is now the highest among major Japanese companies. This has all had a knock-on effect, as junk bond buyers are increasingly freezing out tech startups looking for financing, compounding the problem. On Thursday, JPMorgan Chase & Co. and Goldman Sachs Group Inc. hiked the yield on a $5 billion leveraged loan sale for Volta Infrastructure Holdings Ltd. as investors demanded greater compensation to buy risky debt tied to the artificial intelligence boom. Read more: Aerospace and military contractors raise 2026 profit forecasts “When the sentiment is super bullish, no one cares, and when it’s super bearish, it’s all doom,” said Leonid Mironov, a portfolio manager at Gavekal Capital Ltd. in Hong Kong. “The answer is cash flow: If there’s enough of it to go around, neoclouds will be fine. Positioning being this bearish makes it difficult to gauge actual fundamental impacts.” Elice has government contracts, data centers already in place and profitable operations, yet it still got caught up. “When major neocloud names face turbulent swings in investor sentiment, their smaller competitors in Asia are bound to face the repercussions,” said Homin Lee, a strategist at Lombard Odier. “This is an example of that dynamic. We maintain our focus on large-cap tech names in North America and Asia.” The timing and success of Anthropic’s debut on public markets will be key to watch for anyone hoping the AI boom sustains its flagging momentum. The company, which has already committed to hundreds of billions of dollars of AI infrastructure contracts and is looking for a market valuation in the trillions, is in talks with Nscale for $45 billion of additional capacity. Its ability to sustain its high levels of funding and spending will be essential. “Any negative data point or hint of nervousness causes panic for the tech sector as this multitrillion-dollar AI foundation buildout is tied to a handful of major tech players,” said Dan Ives, senior managing director at Yorkville Ives & Co. (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
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