Shares of leading neocloud companies TeraWulf (WULF), CoreWeave (CRWV), and Nebius (NBIS) have pulled back sharply this week, giving back some of the gains from last week's strong earnings reports. Nebius fell to $241 from a monthly high of $280, while CoreWeave and TeraWulf dropped to $93 and $15.62, respectively.
The sell-off comes as the 30-year Treasury yield climbed to its highest level in over two decades, pressuring growth and technology stocks. Nvidia, the bellwether of the AI boom, slipped to $219 from a weekly high of $227, and other chip names like AMD, Oracle, and Broadcom also declined.
Investors are increasingly worried about a potential AI bubble. Michael Burry, who famously predicted the 2008 financial crisis, has taken short positions against several AI-related companies, including Nebius. Short interest in TeraWulf, Nebius, and CoreWeave stands at 23%, 25%, and 13%, respectively. The European Central Bank also warned this week that a market correction could occur amid the AI investment frenzy.
Despite these concerns, the underlying businesses continue to show robust growth. TeraWulf reported second-quarter revenue of $71 million, down from $47 million a year earlier, reflecting lower Bitcoin prices and its ongoing pivot toward AI data centers. The company's AI segment is gaining traction, highlighted by a 20-year agreement with Anthropic valued at nearly $19 billion, potentially expanding to $33 billion with a five-year extension.
CoreWeave's revenue surged 112% year over year to $2.6 billion, with adjusted EBITDA reaching $1.5 billion. Nebius saw quarterly revenue jump 454% to $582 million. Analysts project continued acceleration: CoreWeave is expected to generate $12.8 billion in revenue this year and $26 billion next year, while Nebius is forecast to reach $3.4 billion and $11.9 billion over the same period. TeraWulf's revenue is projected to climb to $270 million this year and $905 million next year.
However, the cost of expansion remains a significant hurdle. GPU prices, memory, servers, and optical equipment have all soared, forcing these companies to raise substantial capital through debt and equity offerings. This financial strain, combined with rising bond yields that make future earnings less attractive, has weighed on valuations.
Some analysts argue the AI bubble fears are overblown, pointing to strong demand from major players. Anthropic generated over $11 billion in the second quarter, with an annualized revenue run rate of $65 billion. OpenAI's revenue grew 18% quarter over quarter to $6.7 billion, and management indicated accelerating growth in the third quarter.
The recent downturn in chip and neocloud stocks may present a buying opportunity for long-term investors, but the elevated cost of capital and macroeconomic uncertainty suggest volatility could persist. As Burry's bearish bet on Nebius indicates, the market remains divided on whether AI infrastructure spending will translate into sustainable profits.
This article is for informational purposes only and does not constitute financial advice.
