Shares of Nvidia-backed neocloud companies CoreWeave (CRWV), Nebius (NBIS), and IREN (IREN) have experienced steep declines from their recent highs, raising questions about the sector's near-term outlook. The sell-off comes amid mounting concerns over rising costs for key hardware components and intensifying competition from major tech players.
Nebius stock has dropped 37.3% from its 2025 peak, while CoreWeave has fallen over 61% from its post-IPO high of $186. IREN has declined 47% from its yearly high. The downturn has also affected other neocloud firms pivoting from Bitcoin mining, including Riot Platforms, MARA Holdings, Cipher Mining, and HIVE Digital.
Rising costs pressure balance sheets
A primary driver of the sell-off is the surge in prices for servers, memory, and chips. These higher input costs threaten to inflate capital expenditure plans beyond expectations, potentially forcing companies to raise additional capital through debt or equity offerings. CoreWeave's total debt has ballooned to over $25 billion, while Nebius and IREN carry $8.5 billion and $4 billion in debt, respectively. CoreWeave's 2032 bond yield has jumped to 10.32%, and its B credit rating from S&P Global places it in junk territory, signaling elevated risk.
Short interest in these names has also climbed. CoreWeave has a short interest of 27%, Nebius 28%, and IREN 22%. Riot Platforms and MARA Holdings have short interest exceeding 30%, reflecting bearish sentiment among investors.
Competition heats up from SpaceX and Meta
Competitive dynamics are adding to the headwinds. SpaceX has entered the neocloud space, securing large deals with Google, Reflection AI, and Anthropic. Meanwhile, Meta Platforms, a major client for many neocloud firms, plans to begin selling its spare computing capacity, potentially undercutting existing providers. The influx of Bitcoin miners pivoting to AI data centers further saturates the market.
Despite these challenges, the companies continue to secure substantial contracts. Nebius has received large orders from Meta and Microsoft, CoreWeave boasts a revenue backlog exceeding $100 billion, and IREN secured a $9.7 billion order last year plus a recent deal with Perplexity. However, the cost of fulfilling these orders has risen sharply.
For context on broader market trends, Indian power stocks surged on AI data center demand, though valuation concerns persist. Meanwhile, Nvidia stock rose 3% ahead of Alphabet earnings, with BofA highlighting the Vera CPU opportunity.
Revenue growth vs. balance sheet risks
Analysts remain divided on the sector's prospects. On one hand, revenue growth forecasts are robust: IREN's revenue is expected to rise 41% this year to $723 million, CoreWeave's to grow 146% to $25 billion, and Nebius's to surge 540% to $3.39 billion. On the other hand, the high debt levels and potential dilution from future capital raises pose significant risks.
Despite the sell-off, analyst price targets remain optimistic. The average target for CoreWeave is $136, up from the current $76; Nebius is expected to reach $222; and IREN is seen hitting $82, well above its current $37. Whether these targets are achievable will depend on the companies' ability to manage costs and navigate an increasingly crowded market.
This article is for informational purposes only and does not constitute financial advice.
