AI investment concerns deepen as Elice plunges 32% on market debut

Shares in South Korean AI infrastructure provider Elice plummeted 32% on their trading debut on Tuesday, amplifying worries about valuations and returns within the AI sector as investor confidence in data center operators wanes, according to a Bloomberg report. Seoul-based Elice's shares dropped as much as 38% before settling at 61,500 won, setting the record for the worst opening-day performance for a major South Korean IPO.

The rapid sell-off followed a $151 million offering priced at the upper limit of its marketed range, which saw retail demand exceeding 400 times the available shares. The decline signals growing pressure on AI infrastructure valuations, exacerbated by rising borrowing costs and uncertainty surrounding earnings from large-scale capital investments.

US-listed CoreWeave has lost over half its value since its May peak, and its bonds saw sharp declines last week. Similarly, Australia's Firmus Grid scrapped its IPO plans due to valuation concerns, while data center operator AirTrunk postponed its proposed listing. Nscale also faced resistance from investors over its targeted valuation.

Albert Yong, managing partner and chief investment officer at Petra Capital Management, noted a weakening sentiment towards AI infrastructure companies, especially in the US, with valuations becoming more volatile and detached from underlying fundamentals. Despite strong financial performance, Elice's stock took a significant hit.

The company reported a 200% increase in first-half revenue to 34.4 billion won and an operating profit of 10.3 billion won, with EBITDA soaring more than elevenfold to 23.2 billion won. Analysts project revenue growth of 83% in 2026, with an operating margin of around 33%. However, questions linger about the sustainability of these earnings.

Elice, supported by venture capital firms like Vertex Ventures and Altos Ventures, intends to utilize IPO funds to expand its AI data center infrastructure in South Korea and abroad. This underwhelming initial public offering adds to mounting signs of heightened investor scrutiny over AI infrastructure businesses, as concerns about capital intensity, leverage, and profitability cast shadows over the broader sector.