Musk's warning hits neocloud stocks as debt concerns mount

Elon Musk has warned that many neocloud companies may face "guppy-level death" as shares in these firms continue to plummet. CoreWeave and Nebius, two major public neoclouds, have seen their stocks drop sharply in recent weeks due to concerns about their debt levels. Musk questioned the sector on Sunday, stating that while some companies may survive, the majority will not.

The neocloud companies are experiencing even sharper declines, with shares falling further on Monday after Musk's warning. CoreWeave and Nebius have both dropped over 30% over the past month, largely due to worries about the debt they took on to build data centers. Musk attributed the decline to the shutting off of debt markets for companies without substantial independent revenue, meaning the 200+ neoclouds are likely to see consolidation.

Some investors speculate that Musk is trying to drive down the share prices of neocloud companies with the intention of acquiring them. However, Nvidia CEO Jensen Huang remains bullish about the sector, noting that demand for neoclouds is high.