Rackspace’s Nvidia Partnership Sparks Early Rally, But a $2.8 Billion Debt Load Remains

Rackspace Technology, Inc. (NASDAQ:RXT) shares surged over 6% after the firm disclosed its membership in Nvidia's Cloud Partner Program. This partnership is part of a series that has previously caused significant rallies in the stock. However, the market also witnessed the dark side of this news. In early 2026, the stock plummeted by 33.6% in a single day following a guidance reduction and a dilutive capital raise.

The contrasting reactions raise questions about the sustainability of the current rally. Despite the AI partnership potentially driving stock prices higher, Rackspace's financial situation remains a major concern. The company has a substantial debt load of approximately $2.8 billion, coupled with negative equity and negative free cash flow.

The Nvidia partnership does not seem to address these underlying challenges. The market's reaction to this news has led to an increase in hedge fund ownership (22 funds at the end of Q2 2026 from 8 funds at Q1 2026) and a high short interest (22.19% of float as of August 31, 2026). This gap between rising hedge fund ownership and heavy short interest indicates that investors have mixed feelings about the company.

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