What happens to an industry where demand is skyrocketing but which suddenly can’t get any more money?

This question has been on everyone’s mind since yesterday. Elon Musk wrote on X that the credit markets had AI data center operators. Just a few days earlier, the Nebius CEO himself had admitted that key sources of capital had temporarily dried up.

1. The Statements

• Elon Musk: In recent weeks, the credit markets have cut off all companies without significant revenue outside of AI data centers had almost completely cut off access to funding. $SPCX (+5,46 %) I’ve taken on $40 billion in debt for GPUs, but only thanks to investment-grade (= high creditworthiness according to rating agencies) and revenue from Starlink and rocket launches. He predicts a mass extinction and consolidation . He rules out the possibility of SpaceX acquiring any Neoclouds.
• Chamath Palihapitiya: Neoclouds are disorganized and poorly capitalized. By 2027, there will be a lot of partially unused computing capacity, and that year will weed out many bad investments.
• Arkady Volozh, CEO of $NBIS (+8,71 %): Asset-backed financing and debt markets have temporarily dried up. Nebius is working with customer prepayments and other instruments that should be sufficient to build at least the one gigawatt planned for this year.
• Gartner: As early as mid-October, the research firm predicted that by 2030, over 80% of neoclouds would no longer be independent.

Context: Musk is a direct competitor to traditional Neoclouds, as he rents out GPU capacity himself—SpaceX could benefit from negative headlines.

2. Why a lack of capital affects the valuation:

Neoclouds build and buy first, but the money doesn’t come back for years.

This results in a simple chain:

1. Growth requires capital.

2. Capital becomes expensive or is no longer provided at all: CoreWeave bonds $CRWV (+9,46 %) maturing in 2031 yielded at times nearly 16%. At this price, projects are barely profitable, so this funding channel is largely closed.

3. Valuations factor in high growth: The market has priced in years of capacity expansion.

4. This growth cannot be delivered without capital: What isn’t financed won’t be built. Lower growth → lower stock prices. On top of that, companies are raising capital by issuing new shares at low prices, which dilutes the holdings of existing shareholders dilutes and creates further downward pressure.

5. Valuations are coming under pressure: Growth expectations are falling, while at the same time the interest rate used to discount future earnings is rising.

4. How are different types of financing affected?

Closed channels:

• Unsecured high-yield bonds
• GPU loans without high-credit-quality customers
• Asset-backed financing for Neoclouds

Open, but tighter and more expensive:

• Secured loans with investment-grade borrowers: Nebius received on October 22 $3.5 billion from $C (+0,14 %), though with a term of only one year
• Stock sales that dilute shares more significantly when prices are low

Outstanding:

• Customer prepayments
• Bonds for hyperscalers and corporations with other sources of revenue

5. Why isn’t a booming business getting funding?

Investors aren’t short on money. $GOOGL (+1,31 %), $AMZN (+2,04 %), $META (+1,89 %) and $ORCL (+4,54 %) have invested over $228 billion in bonds.

The reason lies in the lender’s logic:

• No share in the boom: If GPU rental rates double, the shareholder benefits. The lender receives only the interest, but bears the loss in the event of a crisis.
• Uncertain collateral: Financiers estimate that a GPU’s value after three years will be 10 to 60 percent of the original price. This is a huge range when billions are invested in GPUs.
• Macro: Due to the Fed’s interest rate hike in September and an oil price above $100 caused by the war in Iran, new issuances in the high-yield market plummeted in October.

Has this ever happened before?

• Data Centers in 2001: Exodus Communications, then one of the largest data center operators, went bankrupt, and its facilities were sold off cheaply. Equinix $EQIX (+0,21 %) barely survived, $DLR (+1,1 %) and was later formed from acquired real estate. Data centers became a huge business—but only for the next owners.
• Fiber Optics 2000–2002: The demand for the Internet was real, but funding dried up. Global Crossing and WorldCom went bankrupt.
• Shale Gas 2015/16: The high-yield energy market dried up; many producers went bankrupt, and the most cost-effective ones took over the rest.
• Crypto Miners 2022: Core Scientific filed for bankruptcy and is now an AI rental provider itself.

The pattern is always the same: When the capital market closes for a capital-intensive industry, the balance sheet, not demand. In these examples, macro-driven freezes lasted weeks to months, while freezes affecting an entire industry lasted about one to three years.

6. Which Neoclouds are affected

The key factor is the business model:

• Landlords with tenants of high creditworthiness:
  $CIFR (+10,92 %) with Amazon as the direct tenant, $WULF (+10,11 %) backed by Google. In the case of $HUT (+8,78 %), $CLSK (+7,33 %) and $RIOT (+8,17 %) investment-grade credit protection is still pending. Banks are primarily reviewing the tenant in these cases, which is why financing continues. They benefit very little from the rise in GPU prices because their rents are locked in for 10–20 years.
• Landlords with a large CoreWeave stake: Galaxy $GLXY (+9,15 %) and Core Scientific, and to some extent also $APLD (+9,72 %), where a hyperscaler now accounts for the majority of tenants. Their risk hinges on the industry’s weak link.
• GPU clouds: $IREN (+11,14 %) , $NBIS (+8,71 %) , $CRWV (+9,46 %) , $USCTF (+11,36 %) and $BTDR (+6,36 %) . This is exactly the channel Musk is referring to. Nebius relies on contracts with $MSFT (+0,83 %) and Meta, while IREN relies on Microsoft; on top of that, there are substantial upfront payments: At Nebius, they cover about 50–60%, and at IREN, about 45% of the respective investments. CoreWeave, on the other hand, contributes about $50 billion in debt and lease obligations.
• Without a signed AI contract:
  $MARA (+6,35 %) and $KEEL (+7,76 %). They need customers and financing in the midst of the lockdown.

7. Conclusion

Overall, Musk’s statement is exaggerated, but essentially correct: For companies that only sell GPU rentals and don’t have customers with high credit ratings, the credit market is currently closed.

However, there’s a contradiction in this situation: What isn’t financed won’t be built, and that further reduces supply further, while Musk himself speaks of exploding demand .

Companies that can finance their capacity are likely to benefit from this.

Customers who urgently need computing power will become more aware of this problem, which could potentially increase prepayments for contracts. In addition, customers could use their own creditworthiness as collateral for their AI computing power providers or become lenders themselves.

In my view, therefore, one question above all else will determine the future of the industry:

Who can secure financing to sustain these growth rates?

The quarterly results in November will provide answers; particular attention should be paid to the financing structure and prepayments.

Sources:

https://x.com/elonmusk/status/2114434646914068862

https://x.com/chamath/status/2114389987563381004

https://www.bloomberg.com/news/articles/2026-10-25/musk-says-spacex-closed-40-billion-debt-deal-blasts-neoclouds

https://www.youtube.com/watch?v=ElxZFG9lfmQ

https://www.sec.gov/Archives/edgar/data/0001513845/000110465926117978/tm2628078d1_ex99-1.htm

https://www.cnbc.com/2026/10/14/coreweave-stock-bond-yields-ai-debt.html

https://www.advisorperspectives.com/articles/2026/10/21/surging-yields-biggest-debt-sale-delay

$NVDA (+4,68 %)$AMD (+6,43 %)$MU (+5,82 %)

By Emily Bary

DOW JONES--According to Elon Musk, SpaceX has secured $40 billion in debt financing amid widespread skepticism toward artificial intelligence (AI). This will enable SpaceX to acquire graphics processing units (GPUs)—a type of AI chip—Musk announced on X, a platform he also owns. SpaceX is rapidly expanding its Neocloud business, through which the company leases access to chips to businesses that need AI computing power.

Musk explained that SpaceX’s investment-grade rating and the company’s diversified business model—which includes revenue from rocket launches and Starlink satellite technology—made the transaction possible. In a separate post, Musk noted that the debt consists “primarily of callable debt for GPU purchases to be delivered in the first and second quarters” and that the agreement would not be a “material factor” in the current quarter. SpaceX did not immediately respond to a request for comment on the debt financing.

In recent weeks, investors had become increasingly nervous about debt financing in the AI sector—particularly in connection with Neocloud companies like Coreweave, which rely on debt to fuel their growth. The pressure on Coreweave’s bonds has caused unease across the tech landscape, partly due to the close interconnections among large corporations. Coreweave did not immediately respond to a request from MarketWatch for comment on Musk’s remarks.

“Over the past few weeks, the credit markets have almost completely cut off access to funding for nearly every company that cannot demonstrate significant revenue independent of AI data centers,” Musk wrote in his X post on Sunday. He also predicted that “more than 200 Neocloud providers will experience a Guppy-level mass extinction and a wave of consolidation.” “Some will make it through, but not many,” he added.

Musk further hinted that his company would not be part of any future industry consolidation. He wrote: “SpaceX isn’t buying any Neoclouds. Completely pointless.”

Contact: redaktion.de@dowjones.com

DJG/DJN/hab/mgo

(END) Dow Jones Newswires

October 26, 2026 04:15 ET (08:15 GMT)

(c) 2026 Dow Jones & Company, Inc.

$SPCX (+5,46 %)
$CRWV (+9,46 %)
$IREN (+11,14 %)
$HUT (+8,78 %)
$NVDA (+4,68 %)

Last week's Neocloud crash has $CRWV (+9,46 %), $NBIS (+8,71 %) and $IREN (+11,14 %) sent it into a tailspin. What’s behind this, and what has actually changed for the future?

It all starts with the price of oil

Since the attacks on Iran, the price of oil has risen from ~$80 in August to over $106 per barrel. This is having a major impact on U.S. inflation:

• Consumer Price Index (CPI): 3.7% in September, compared to an expected 3.6%. That’s nearly double the Fed’s 2% target
• Core inflation: 2.6%, also above expectations
• Producer prices (PPI): 6.3% year-over-year, more than three times the Fed’s target. Month-over-month: +1.3%, nearly double the expected increase and the sharpest rise since March 2022

The Fed raised interest rates on September 16 for the first time since 2023 raised interest ratesto 3.75–4.00%. The yield on 10-year U.S. Treasury bonds stood at over 5.2% at the end of September, the highest it has been since 2007. Added to this is a U.S. government that is sinking deeper and deeper into debt and must continually issue new bonds.

This is precisely where the problem with Neoclouds lies: The expansion of AI is largely financed by debt and competes for the same investors as the U.S. government. If a government bond yields over 5% with almost no risk, lenders will demand significantly more from a company that is still operating at a loss.

The trigger for the crash: CoreWeave’s bonds

On October 14, a chart went viral showing a CoreWeave bond worth $1.25 billion with a yield of just under 15% . It was issued in June at 9.625%. The credit default swap (CDS) is at a record high of 1,194.5 basis points; on October 6, it was still at 368.

According to standard calculations, this corresponds to a probability of default of over 60% within five years.

On the same day, Gartner added: By 2030, over 80% of Neocloud providers are expected to lose their independence. By then, AI data centers would generate at most $3.6 trillion in revenue, whereas $8.5 trillion would be needed.

Is this fear justified?

In CoreWeave’s case, partly yes. The higher market yield doesn’t affect the interest rate on existing bonds, but each new round of financing becomes more expensive, and CoreWeave’s growth depends on new loans. However, the 60% figure is a market price from a week of panic and not a forecast.

IREN and Nebius are in a different position

IREN has financed the Microsoft project $MSFT (+0,83 %) at ~6% with $3.6 billion. Microsoft accepted Horizon 1 in August, and revenue has been generated since then. Horizon 2 through 4 are scheduled to follow in the fourth quarter; contractually, there is a buffer until early Q2 2027.

Information is currently circulating on X that Microsoft $IREN (+11,14 %) is said to have provided incorrect network requirements, forcing the current Childress data centers to be have to be . Horizon 2 is reportedly delayed by ~45 days as a result; Horizon 1 will continue to operate and will continue to be paid for by Microsoft during the retrofit. Horizon 3 & 4 are not expected to be affected, as they will be completed directly with the correct network specifications. Thus, all four buildings are expected to generate revenue by the end of the year as planned. None of this has been officially confirmed.

In July, Nebius switched to a more capital-efficient model in which partners finance the data centers. In addition, advance payments from customers already amount to ~40–55% of the contract total, which alleviates a large portion of Neocloud’s financing risk. Added to this is the possibility of asset-backed financing, whereby the data centers themselves can be used as collateral for loans, thereby reducing interest rates. Nevertheless, the market treats the three companies—with their differing financing risks—as a single entity.

Demand points in the opposite direction

The GPU rental prices are rising: As of October 1, Nebius raised the price for B300 GPUs by 21% to $9.50 per hour—the second increase in three months.

The DESKB300 Rental Index, based on actual rental transactions at U.S. neoclouds, reached a record high in mid-October, driven in part by inference using open-source models. This does not bode well for concerns that GPUs are depreciating too quickly.

GPU rental prices could also be influenced by rising financing costs and thus increase—so overall, this is more of a neutral process.

Jensen Huang told Bloomberg in Berlin on October 16: “All of this is going to pass.” AI will transform every industry, he said, and we’re only at the beginning. According to Huang, CoreWeave’s cost of capital is actually falling. The bond market saw things differently this week.

Time is the real bottleneck

A data center isn’t built in a single quarter. Securing land and a power connection often takes years, and the construction itself is complex. Neocloud stocks are bets on where these companies will be in three to five years, but they’re traded as if they had to deliver every week.

Even with growing demand, not all of them will make it. Some will repeatedly dilute their shareholders, some will be acquired, and some will fail.

What matters is how management finances the expansion and whether it delivers on its promises.

Sharp sell-offs, months of stagnation, and rallies after which everyone suddenly turns bullish again are all part of this sector and should be clear to every investor. A five-year thesis is difficult to gauge based on year-to-date performance.

Overall, the market is pricing in a financing problem—one that is particularly acute for CoreWeave—and applying it to the entire sector. At the same time, demand for computing power shows no signs of weakness—quite the opposite.

High long-term interest rates are the main risk for all players

If government bond yields remain above 5% for the long term, every new round of financing will become more expensive, and that affects all three companies. CoreWeave, Nebius, and IREN are only at the beginning of their expansion and will need to raise many billions more for data centers and GPUs in the coming years. More expensive financing therefore puts direct pressure on future returns. Against this backdrop, the sell-off is understandable, even if demand itself remains intact.

Key events to watch include Nebius’s earnings report, expected on October 22; the Fed meeting in late October; and the acceptance of Horizon 2. Additionally, the course of the conflict (Iran & the U.S.) must be closely monitored, as it will significantly shape future developments.

Not investment advice

Sources:

https://www.cnbc.com/2026/10/15/coreweave-credit-default-swaps-hit-distress-levels-as-investors-sour-on-ai-debt.html

https://www.cnbc.com/2026/10/15/whats-behind-the-sell-off-in-ai-neocloud-stocks-like-coreweave-and-nebius-.html

https://www.gartner.com/en/newsroom/press-releases/2026-10-14-gartner-says-over-us-dollars-three-and-a-half-trillion-of-artificial-intelligence-infrastructure-spending-could-be-exposed-to-impairment-by-the-end-of-2030

https://www.bls.gov/news.release/cpi.nr0.htm

https://www.bls.gov/news.release/ppi.nr0.htm

https://www.sec.gov/Archives/edgar/data/0001878848/000187884826000052/iren-20260630.htm

https://www.bloomberg.com/news/articles/2026-10-16/nvidia-ceo-on-ai-market-turmoil-all-of-this-is-going-to-pass

$ORCL (+4,54 %)$APLD (+9,72 %)$CIFR (+10,92 %)$GOOGL (+1,31 %)$MSFT (+0,83 %)$AVGO (+4,62 %)$AMD (+6,43 %)$INTC (+6,11 %)$HUT (+8,78 %)

$NVDA (+4,68 %)
$HUT (+8,78 %)

(I personally own shares in Nvidia)

Nvidia is leasing a data center in Texas to secure massive computing capacity for the AI developer Anthropic through the provider Lambda.

The AI developer Anthropic has signed another cloud computing contract worth billions. The agreement is worth $35 billion and will be handled through Lambda, the cloud provider backed by Nvidia. What makes this transaction unique is that chip giant Nvidia itself holds the actual lease agreements for the underlying data center in Nueces County, Texas.

The campus is being developed by data center developer Hut 8. Nvidia had already secured the capacity there a few weeks ago through a lease agreement, with the intention of passing it on to Anthropic via Lambda. This unusual arrangement underscores Nvidia’s growing role as a financier and intermediary in the AI ecosystem: The company is leveraging its enormous financial clout to secure large-scale contracts for emerging neocloud providers like Lambda while simultaneously ensuring sales of its own high-performance chips.

Capacity Bottlenecks Force Massive Multicloud Expansion

For Anthropic, the agreement is part of an aggressive procurement strategy after the company hit capacity limits due to the enormous demand for its Claude models. Just a few weeks ago, the developer closed a $45 billion cloud deal with provider Nscale for facilities in West Virginia.

An interesting side note regarding the Texas transaction: Hut 8 is also separately building Rechenzentren for Anthropic, which will utilize Google’s competing TPU chips. Google has provided financial guarantees to support Hut 8 in raising debt capital. Hut 8 had reported in July that a tenant with top creditworthiness had leased the entire 700-megawatt campus for 15 years—as has now been revealed, that tenant was Nvidia.

Nvidia stützt 35-Milliarden-Cloud-Deal für Anthropic

$MAR (+1,1 %)
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Moonshot AI posted the following update on Sunday:

"Kimi K3 has been much more popular than we expected, and our GPUs are feeling the strain.

Over the past 48 hours, demand has nearly reached the limits of our current capacity. To protect the experience of existing subscribers, we’re temporarily pausing new subscriptions and prioritizing computing power for current members. Existing subscribers are not affected by this.

We’re scaling up additional capacity as quickly as possible and will gradually reopen new subscription slots in batches.

Going forward, we’ll also be splitting the membership into two more targeted plans: Kimi Membership for Kimi Web, App, and Work, and Kimi Code Membership for coding workflows. This will help us allocate computing power more precisely and keep the experience stable.

Thank you very much for your patience and understanding!"

$IREN (+11,14 %)
$NBIS (+8,71 %)
$CRWV (+9,46 %)
$HUT (+8,78 %)
$CLSK (+7,33 %)
$KEEL (+7,76 %)
$USCTF (+11,36 %)
$APLD (+9,72 %)
$WULF (+10,11 %)
$CIFR (+10,92 %)
$ (+0,93 %)HIVE (+0,93 %)

$NVDA (+4,68 %)

Nvidia announced a new partnership model for Neoclouds (specialized GPU cloud providers): Nvidia acts as a financial backstop and commits to leasing back unused GPU capacity at a fixed price. In return, Nvidia receives a share of its partners’ cloud revenue in addition to hardware revenue.

• First partners: Firmus (170,000 GPUs in Indonesia) and Sharon AI (40,000 GB300 GPUs)
• Predecessors: similar deals with $CRWV (+9,46 %) (6.3 billion $, 2025) and Lambda (1.5 billion $)

$NBIS (+8,71 %)$USCTF (+11,36 %)$CIFR (+10,92 %)$WULF (+10,11 %)$APLD (+9,72 %)$KEEL (+7,76 %)$CORZ (+6,44 %)$HIVE (+0,93 %)$BTDR (+6,36 %)$CLSK (+7,33 %)$MARA (+6,35 %)$HUT (+8,78 %)$RIOT (+8,17 %)

$IREN (+11,14 %) has so far not named as a participant—but has had a strategic partnership with Nvidia since May covering up to 5 GW of AI infrastructure, a $3.4 billion cloud contract , and Nvidia holds the right to purchase up to 2.1 billion IREN shares .

Adopting this model seems like a very logical step, since IREN will require extremely high investment costs (>$100 billion) to expand its entire pipeline.

In my view, this would be very positive in the short to medium term.

The biggest risk with $IREN (+11,14 %) and other Neocloud providers is not demand, but rather the financing of their expansion plans, which run into the billions. A backstop from Nvidia would mitigate precisely this risk: Banks are much more willing to grant loans when the world’s largest chipmaker guarantees capacity utilization—this would provide significant security and more favorable, virtually lower-risk financing. However, the revenue share would directly impact the profit margin . In the long term, companies would thereby cede part of their overall potential to Nvidia—essentially trading long-term profitability for medium-term security.

Source: https://www.datacenterdynamics.com/en/news/nvidia-acts-as-backstop-for-customer-gpus-in-return-for-cut-of-cloud-revenue/