Elice, a data center and AI developer, saw its stock price fall 32% on its debut in Seoul on Tuesday. "Elice's disastrous debut is another confirmation that the era of 'buy everything AI' has given way to 'question everything AI,'" said Hebe Chen. Many investors now fear the AI boom.
Synopsis
Elice, a data center and AI developer, faced a significant decline in its stock price during its debut. This situation exemplifies a broader trend where investors are increasingly skeptical about AI valuations and prospects. Several companies, including CoreWeave and Firmus Grid, have also encountered investor pushback regarding their financial outlooks. Rising borrowing costs are contributing to these concerns, impacting the performance of tech stocks, including semiconductors.
Scarcely known outside its home market until this week, Elice on Tuesday found itself at the heart of a roiling debate about AI valuations and whether companies will be able to deliver on them.
The $750 million data centre and AI developer became a surprise poster child for the loss of faith in so-called neoclouds when it tanked 32% on its debut in Seoul. It joined a half dozen other companies in the sector that just over the past few weeks have shown investors souring on artificial intelligence. Australia's Firmus Grid and AirTrunk have delayed public offerings, Britain's Nscale and US peer SB Energy faced investor pushback on their valuations, and CoreWeave's bond yields shot up to 15%.
S&P 500 Top Gainers
Equifax176.54(11.33%)
Hasbro109.52(11.20%)
Moderna242.08(6.69%)
3M171.37(5.78%)
S&P 500 Top Losers
Coterra Energy32.56(-8.62%)
General Motors77.09(-6.84%)
DaVita175.35(-6.23%)
Genuine Parts123.52(-5.12%)
In a sharp reversal from the broad-based pile-in of recent years, global markets are now being much more selective and demanding with AI bets. Neoclouds, the firms that specialise in running dedicated facilities for AI computation delivered over the internet, are an essential part of the supply chain that customers like Anthropic PBC and OpenAI tap in multibillion-dollar deals for capacity. But worries about financing, delays in data center construction and the uncertainty of returns have jolted the entire tech ecosystem, triggering the longest losing streak in semiconductor stocks since the global financial crisis.
"Elice's disastrous debut is another confirmation that the era of 'buy everything AI' has given way to 'question everything AI,'" said Hebe Chen, senior market analyst at Vantage Global.
Live Events
Neoclouds are particularly vulnerable. New Jersey-based CoreWeave is the best known among them, pioneering the business model of taking on significant debt to load up on Nvidia graphics processing units (GPUs) that it later rents out in multiyear contracts. Its 18 months on public markets have shown the wild swings of confidence in this strategy: the company's market value approached $90 billion last year, with Nvidia a vocal backer and investor, but it's endured a brutal selloff since then and is now more than 60% off its peak.
Firmus's initial public offering valuing it at $30 billion collapsed, while Nscale is facing investor skepticism on a listing at a similar valuation. The two have run into the real-world challenges of converting AI computing demand and orders into functional operations, as both have only a small fraction of their planned data centre capacity live. As the cost of capital increases, investors are becoming more wary of companies depending heavily on future revenues.
Soaring borrowing costs were the catalyst for CoreWeave's most recent selloff. Its bonds this month sank into distressed territory - leading Nvidia chief executive officer Jensen Huang to step in to reassure markets - while AI investor SoftBank Group's credit risk rose to the highest level in nearly four years. SB Energy is SoftBank's vehicle for setting up AI infrastructure in the US, but its IPO talks have slowed to a crawl and regulatory approvals have also taken longer than expected.
One of the world's most enthusiastic investors in AI, SoftBank faces pressure on several fronts. Its largest holding is a significant share in OpenAI, which already pushed its IPO into next year, and the SB Energy debut was designed to help it raise funds to support its construction projects in the US. SoftBank pushed through the largest corporate junk-bond offering on record last month, raising roughly $11 billion.
(You can now subscribe to our ETMarkets WhatsApp channel)
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
...moreless
(You can now subscribe to our ETMarkets WhatsApp channel)
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
...moreless
One company, 2 words. Bond yield and CDS: Will they decide the fate of global markets?
Business of Odd Things: Inside an industry that farms fish that nobody is meant to eat
War's second-order effects are becoming visible in critical sectors
US mid-term elections – Part 2: What does it mean for Trump to lose control of Congress?