Treasury Secretary Scott Bessent said he does not see neocloud debt as a problem, calling the sector a small part of the wider AI ecosystem. His comments come as investors worry about debt levels, borrowing costs and AI returns.
Treasury Secretary Scott Bessent played down concerns over neocloud debt in a CNBC interview on Wednesday. Asked about yields on some AI-related debt climbing into the double digits, he said they monitor all of this.
According to Bessent: "I don't think it's problematic at all", because neoclouds are a small component of the overall ecosystem. He added that financing was still getting done, as were deals, and pointed to companies like Meta choosing to finance with equity.
Neocloud stocks fall under pressure
The neocloud industry, which includes players such as CoreWeave and Nebius, provides cloud computing services to AI customers. Nebius signed a deal worth over $17 billion with Microsoft last September, and in March it announced a five-year contract with Meta that could be valued at up to $27 billion.
Still, the sector has come under pressure over the past few weeks as investors fret about mounting debt levels, rising borrowing costs, and whether AI spending will produce sufficient returns. CoreWeave shares fell by nearly 40% in October, though they have recovered slightly from the October 23 low. The Roundhill Neocloud ETF, which invests in CoreWeave, Nebius and IREN, has fallen 24% over the past month.
Musk and Huang weigh in on neoclouds
Elon Musk added to the worries in an X post on Sunday. He wrote that many neoclouds will face death and consolidation, and that debt markets are hesitating to fund companies that rely almost entirely on AI data centers for revenue. He also said SpaceX would not be acquiring any neocloud companies.
Nvidia CEO Jensen Huang, whose company has backed several major neocloud providers, took a more optimistic view. Earlier this month he told CNBC that demand for neoclouds is very strong.
Source: Business Insider
Trading involves risk.
Risk Disclaimer
