Turmoil hits AI buildout as neoclouds face pressure, credit risks mount and Solidigm pulls IPO

Mike Intrator, Chief Executive Officer and founder of CoreWeave, poses for a photo during the company's Initial Public Offering(IPO) at the Nasdaq headquarters on March 28, 2025 in New York City.

Michael M. Santiago | Getty Images

Neoclouds tanked. Credit default swaps soared. Meta turned cash flow negative. And SK Hynix's Solidigm unit cancelled plans for its initial public offering.

It's been a rocky week for the AI infrastructure trade.

The Nasdaq followed Thursday's beating with an additional drop on Friday to end the week down 0.7%. Among the hyperscalers, the worst performer was Alphabet, which sank 6% ahead of the internet giant's third-quarter earnings report next week. Microsoft and Amazon are also on the docket, and they each fell less than 1%.

While the tech market has thus far avoided a dramatic across-the-board selloff, the artificial intelligence buildout is showing signs of strain.

Neoclouds CoreWeave, Nebius and IREN all fell sharply this week, bringing their losses for October to well over 30% each. CoreWeave, the leader of the pack, has seen spreads on its CDS widen past 11%, generally viewed as a distress level, as investors have to pay up for protection against default.

Meanwhile, yields on the company's 2031 and 2032 unsecured notes topped 15%.

"What investors are doing is throwing every baby out with the bathwater and saying anyone who is a neocloud" will be devalued, Roundhill Investments CEO Dave Mazza told CNBC's Squawk on the Street on Thursday.

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Fears aren't limited to the U.S. market. Shares of Elice Group, a South Korean cloud provider, dropped 30% in their market debut on Tuesday, and Australia's NextDC plunged 39.5% on Wednesday after the data center operator slashed its annual earnings forecast. 

Analysts at research and advisory firm Gartner predict that 80% of neocloud companies will either cease operations or be absorbed by 2030.

Withdrawn IPO

Minh Connors | Bloomberg | Getty Images

— CNBC's Katie Tarasov contributed to this report