US Stock Market Move | Musk warns: Over 200 AI cloud providers face a shakeout; neocloud stocks briefly plunged.

On Monday, US-listed neocloud stocks fell sharply in early trading, with Nebius (NBIS.US) dropping more than 5% at one point, while CoreWeave (CRWV.US) and Iren (IREN.US) fell over 4%. As of publication, the declines had narrowed somewhat. On the news front, Musk posted on X on Sunday, stating bluntly that more than 200 Neocloud companies will face "death and consolidation at the small-fish level." The remark further deepened market doubts over whether the sector's debt-driven expansion can be sustained. Nebius Group CEO Arkady Volozh acknowledged that it is becoming increasingly difficult for neocloud companies to obtain debt financing. Meanwhile, concerns over neocloud companies' business models and reliance on leverage continue to heat up, weighing on their share prices. He said some funding sources have temporarily dried up, including "asset-backed financing or the debt market," but Nebius has sufficient funds to advance its planned capacity expansion. Over the past month, the Neocloud sector has been hit hard CoreWeave and Nebius have both fallen more than 30% cumulatively, while Iren has plunged over 40%. The selloff began earlier this month when CoreWeave's five-year credit default swap spread climbed to a level typically seen as a signal of financial distress, with its bond yields rising in tandem, raising serious questions among investors about the industry's business model of borrowing heavily to buy NVIDIA Corporation chips and build data centers.