Nebius and CoreWeave have seen their shares slide this month as investor anxiety over a potential AI bubble intensifies. CoreWeave has dropped more than 60% from its all-time high, erasing tens of billions in market value. Nebius, along with other neocloud operators such as IREN, RUM Group, and RIOT Platforms, has also suffered significant declines.
Ken Griffin's Warning Adds to AI Bubble Fears
The selloff comes as prominent investors voice concerns about frothy valuations in the artificial intelligence sector. Ken Griffin, founder of Citadel and Citadel Securities, stated that the market is clearly in an AI bubble. His remarks carry weight given his firm's scale and influence in global markets.
Griffin joins a growing list of skeptics. Ray Dalio, founder of Bridgewater Associates, has also warned that the AI sector could be in a bubble that may burst as interest rates remain elevated. Michael Burry has gone a step further, taking short positions in major AI-related companies, including Nebius.
These warnings coincide with the AI Stock Bubble Index, which has climbed to 74, placing it in the elevated risk zone. The index tracks metrics such as valuations, funding hype, and revenue uncertainty.
A bursting of the AI bubble would hit neocloud companies like CoreWeave and Nebius particularly hard, as it would undermine demand from their largest customers.
Additional Risks: Gartner Report and Intensifying Competition
Beyond the bubble debate, Nebius and CoreWeave face structural challenges. Gartner, a leading research firm, released a report last week warning that AI infrastructure companies will need to generate trillions of dollars in revenue to justify their capital expenditure plans. The report suggests these firms may have to announce significant impairments by 2030.
Competition is also heating up. Nscale, a British data center company, is reportedly in talks with Anthropic for another large contract, just weeks after the two finalized a $45 billion agreement. Meanwhile, numerous Bitcoin mining companies have pivoted into AI infrastructure, and firms like Lambda, Firmus, and SpaceX are expanding their data center operations. These competitive pressures have kept short interest in Nebius and CoreWeave elevated.
Revenue Growth vs. Depreciation
On the positive side, both companies are experiencing robust revenue growth. CoreWeave reported third-quarter revenue exceeding $2.5 billion, and analysts expect continued expansion. Nebius posted revenue of over $529 million in the same period.
Wall Street projects CoreWeave's annual revenue to reach $12.8 billion this year and $26 billion next year. Nebius is expected to generate $3.3 billion in 2025 and $12.2 billion in 2026.
However, the firms are booking substantial depreciation charges, a trend that may persist as newer, more advanced chips are introduced. This could weigh on profitability and investor sentiment.
This article is for informational purposes only and does not constitute financial advice.
