AI Infrastructure Sector Rattled as Neocloud Stocks Slide, Credit Risks Climb and Solidigm Halts IPO

The AI infrastructure trade took a hit this week. Neocloud stocks tumbled, credit default swaps spiked, Meta reported negative cash flow, and SK Hynix's Solidigm unit called off its initial public offering.

The Nasdaq slipped 0.7% for the week after Thursday's selloff. Alphabet was the weakest of the hyperscalers, dropping 6% ahead of its third-quarter earnings, while Microsoft and Amazon each fell less than 1%.

Neoclouds CoreWeave, Nebius and IREN all fell sharply, with October losses for each now well past 30%. CoreWeave's CDS spreads widened beyond 11% - a level generally seen as distress - and yields on its 2031 and 2032 unsecured notes topped 15%. Roundhill Investments CEO Dave Mazza told CNBC that investors are "throwing every baby out with the bathwater" when it comes to neoclouds.

The pressure wasn't confined to the U.S. South Korea's Elice Group fell 30% in its market debut Tuesday, and Australia's NextDC plunged 39.5% Wednesday after cutting its annual earnings forecast. Gartner analysts predict 80% of neocloud companies will shut down or be absorbed by 2030.

Nvidia CEO Jensen Huang remains optimistic, saying in Berlin that demand for neoclouds is "off the charts" and that capital demand exceeds availability - something he said will get solved.

SK Hynix pulled Solidigm's IPO citing market volatility, saying the review was discontinued given market conditions and share price trends. Meta's stock fell 7% Thursday after reporting negative free cash flow of over $2 billion and raising its full-year capex floor to $135 billion from $130 billion. Meta's five-year CDS spreads hit all-time highs above 124 basis points, while Nvidia and Oracle also touched records at 126 and 343 basis points respectively.

Source: CNBC