Concerns over the AI trade pushed the Nasdaq lower this week, with neocloud stocks posting some of the steepest losses. Credit default swap spreads on Meta, Nvidia and Oracle hit records, and SK Hynix abandoned plans for an IPO of its Solidigm unit.
Neocloud stocks tumbled this week, credit default swaps climbed, and SK Hynix pulled the planned IPO of its Solidigm unit. The AI infrastructure trade had a rocky week, and the AI buildout is showing signs of strain.
The Nasdaq ended the week down 0.7% after a further drop on Friday. Tech has so far avoided a dramatic across-the-board sell-off.
CoreWeave, Nebius and IREN lose well over 30% in October
Shares of CoreWeave, Nebius and IREN all fell sharply this week, pushing their October losses to well over 30% each. Spreads on CoreWeave's CDS have widened past 11%, a level generally viewed as distress, and yields on its 2031 and 2032 unsecured notes topped 15%.
Gartner analysts predict that 80% of neocloud companies will either cease operations or be absorbed by 2030. Nvidia CEO Jensen Huang remains bullish, however. According to CNBC, he said at a company conference in Berlin that "demand for the neoclouds is off the charts."
Meta and Oracle credit spreads hit records
The strain reached the largest tech names. Meta shares plunged 7% on Thursday after the company reported negative free cash flow of over $2 billion in the third quarter. It also raised the floor of its full-year capex to $135 billion from $130 billion.
Spreads on Meta's five-year CDS reached all-time highs of over 124 basis points. Spreads on Nvidia and Oracle CDS also touched records, at 126 basis points and 343 basis points respectively. Oracle's stock has lost over one-third of its value this year.
Even so, all of tech's mega-caps have kept their investment-grade rating, including while funding their buildouts through debt.
SK Hynix shelves the Solidigm IPO
On Thursday, SK Hynix said it was pulling the IPO for Solidigm, its U.S.-based unit, citing market volatility. The company bought Solidigm, which makes NAND and SSD storage for data centers, from Intel in 2021.
Abroad, shares of South Korean cloud provider Elice Group dropped 30% in their market debut on Tuesday. Australia's NextDC plunged 39.5% on Wednesday after cutting its annual earnings forecast.
Source: CNBC
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