AI Neoclouds Lose Their Shine, Stalling IPOs and Sinking Stocks

Author: Bloomberg Television · Watch on YouTube

Video authored by the channel shown, not by IANIA; all rights belong to the creator. Transcript and summary generated automatically; the original-language content is preserved.

Original language: English

Original video: AI Neoclouds Lose Their Shine, Stalling IPOs and Sinking Stocks · Channel: Bloomberg Television · 03:13 · Watch on YouTube

Topics: AI infrastructure and hardware, Markets and economy, Open source and software ecosystems

Summary

Rising borrowing and data-center costs are putting pressure on neocloud companies that locked in customer pricing through multiyear contracts. While demand and revenue visibility remain strong, falling token prices amid open-source competition create a squeeze on both costs and revenue. Investors are also reacting sharply to leverage, contributing to volatile share prices and IPO pullbacks. Short selling is adding further pressure.

Key points

The cost of capital and the costs of data-center inputs have risen.
Some neoclouds have signed three-to-five-year contracts with pricing that may be difficult to adjust as costs rise.
Hyperscalers are better positioned to handle cost increases because of their scale.
Companies cite long-term backlogs, revenue visibility, and strong demand for AI tokens.
Open-source competition has pushed token pricing down, adding pressure alongside rising costs.
Investors have been selling data-center companies that rent GPUs when they see even a hint of leverage.
Some stocks have fallen sharply despite no missed quarter or fundamental change, according to the discussion.
Some companies pulled back their IPOs amid volatility, and short sellers are active.

Chapters

Start	Chapter	Summary
00:00	Rising costs and fixed contract pricing	The discussion examines how higher borrowing and data-center costs affect neoclouds with multiyear customer contracts.
01:04	Strong demand, but falling token prices	Companies point to backlogs and strong demand, while open-source competition pushes token pricing down.
01:36	Market volatility and investor reactions	The speakers discuss volatility and investor concerns about GPU-rental businesses with leverage.
02:10	Leverage as a major risk	The guest says investors are selling companies on even a hint of leverage, making the cost of capital a key risk.
02:42	IPO pullbacks and short selling	The discussion turns to IPOs pulled back amid volatility and the activity of short sellers.

Quotes

the hyperscalers can handle it, because they obviously have the scale on their side. — 00:32

The high demand is still very strong. — 01:04

there are two negative forces at play here — 01:36

Even a hint of leverage. Investors are just selling your stock — 02:10

the short sellers are very active when it comes to this. — 03:13

Concepts and entities

neoclouds, hyperscalers, cost of capital, GPU rental, open source competition, IPO, short selling

Full transcript (original language)

00:00 We know the cost of capital has gone up. The Treasury yields and everything. Borrowing costs have gone up. And for some of these companies that did, you know, 3 to 5 year contracts where they locked in pricing. Investors are asking, okay, your costs uh, input costs are going up, but you have already, uh, signed a 3 to 5 year contract in terms of how much are you going to charge the customer? So how do you handle that situation, which is the situation that curve in a lot of the neo clouds are in, because

00:32 they thought it was helping their revenue visibility, you know, signing three five year contracts, but suddenly cost of capital. Everything has gone up, not just the chips, but everything that goes inside the data center. And so that is where the hyperscalers can handle it, because they obviously have the scale on their side. But for some of these entities, I think that puts a question mark around just the business model. Is that a cfo’s job to answer that then? Uh, yeah, I think so. It’s just a management teams question. It is. And how are they answering that?

01:04 Well, so right now they keep pointing to the fact that they have a backlog which is like five years out. They have, uh, high revenue growth, visibility. And look, the high demand is still very strong. One thing we know is everyone wants to use these AI tokens. Nothing has changed on that front. The other dynamic is the token. Pricing has been going down because there’s more open source competition. So suddenly you’re hit on both fronts. Your costs are going up and then your token pricing is coming down because

01:36 there is more open source competition. So even though all the demand trends are healthy, it’s just there are two negative forces at play here, and which is why you’re seeing so much volatility. So what do I take away from this. John Tucker should be reporting on all morning this Korean IPO. Elyse. Is that. Yeah. Bell and Ellis. Thank you. Um, you don’t see that very often. And if anybody was looking for a canary in a coal mine, might this be something? Oh, right. Now, I think everything is being treated the same way in terms of, you know, any data center company that is in the

02:10 business of renting GPUs. It’s like if you have got leverage. Even a hint of leverage. Investors are just selling your stock without even looking at your fundamentals in a grand another event. So from that perspective, I am not surprised to see, you know, these uh, uh, big reactions, you know, 30% drawdown, uh, when when you haven’t missed any quarter or fundamentally, nothing has changed. But that’s the market we are in in terms of, uh, leverage and just the cost of capital. I think that’s the biggest, uh, risk

02:42 right now. I’m kind of surprised that they actually went public. Why do you think they did that? I mean, even though it’s not in the U.S., but this is a global that I trade as a global trade. Yeah, it is. And so that’s where a couple of the companies did pull back their IPO. So, uh, they, they thought they could, uh, you know, withstand, uh, all the volatility. And they were giving enough visibility to their investors to, you know, buy in, uh, to, uh, you know, the stock. But, uh, apparently that didn’t happen. And there’s a lot of short selling going

03:13 on right now as well. So you have to remember, the short sellers are very active when it comes to this.