Scott Bessent says neocloud debt isn't problematic at all

Treasury Secretary Scott Bessent expressed little concern over the neocloud debt debate that has recently unsettled investors. In a CNBC interview, he stated that AI-related debt is not problematic and constitutes only a small portion of the AI ecosystem. Bessent's comments come after AI-related debt yields climbed into the double digits, causing neocloud stocks to slump.

He emphasized that neoclouds are a minor component of the overall AI industry, and financing and deals are still taking place. Companies such as Meta have opted to finance their activities through equity rather than debt. The neocloud sector, comprising firms like CoreWeave and Nebius, has been under scrutiny due to mounting debt levels, rising borrowing costs, and doubts about AI investments yielding sufficient returns.

Despite CoreWeave's stock plummeting by nearly 40% in October, it has since rebounded slightly. The Roundhill Neocloud ETF, which invests in key neocloud entities such as CoreWeave, Nebius, and IREN, has dropped 24% over the past month. Elon Musk's pessimistic remarks about neoclouds facing potential "guppy-level death and consolidation," as well as Nvidia CEO Jensen Huang's optimistic outlook, underscore the ongoing uncertainty surrounding the industry.