AI Infrastructure Market in Turmoil as Neocloud Shares Plunge and Credit Risks Mount

CoreWeave, Nebius and IREN lose over 30% in October; SK Hynix pulls Solidigm IPO; Meta reports negative cash flow

By LineZotpaper AI staff

Published24 October 2026

Read Time3 min

The artificial intelligence build-out is showing severe strain this week, with shares of leading neocloud companies falling sharply, credit default swap spreads widening, and SK Hynix withdrawing the initial public offering of its Solidigm unit. The sell-off reflects growing investor skepticism about the returns from the enormous capital expenditure on AI infrastructure, even as Nvidia CEO Jensen Huang remains confident that demand will outpace capital availability.

The turmoil hit the neocloud sector especially hard. CoreWeave, Nebius and IREN all saw their shares drop sharply, bringing October losses to well over 30% each. CoreWeave's credit default swap spreads have widened past 11%, generally considered a distress level, while yields on its 2031 and 2032 unsecured notes topped 15%.

"What investors are doing is throwing every baby out with the bathwater and saying anyone who is a neocloud will be devalued," Dave Mazza, CEO of Roundhill Investments, told CNBC's "Squawk on the Street."

The fears are not confined to the United States. South Korea's Elice Group dropped 30% on its market debut on Tuesday, and Australia's NextDC plunged 39.5% on Wednesday after slashing its annual earnings forecast.

Global research firm Gartner predicts that 80% of neocloud companies will either cease operations or be acquired by 2030.

Nvidia CEO Jensen Huang, speaking at a company conference in Berlin, pushed back on the pessimism. "Demand for the neoclouds is off the charts," Huang said, and while "the demand of the capital is much greater than the availability of the capital, that's going to get solved."

Wall Street, however, remains unconvinced. On Thursday, SK Hynix announced it was pulling the IPO for its Solidigm unit, which makes NAND and SSD storage for data centers. The company cited market volatility and share price trends.

Among the larger tech companies, investor unease is also evident. Meta saw its stock fall 7% on Thursday after reporting negative free cash flow of over $2 billion in the third quarter, while raising its full-year capital expenditure forecast to $135 billion from $130 billion. Meta also said it plans to spend about $825 billion over the coming years on various leases and contracts, with over $450 billion of those agreements being non-cancellable take-or-pay.

Credit default swap spreads on Meta, Nvidia and Oracle all reached record levels this week. Oracle's stock has lost more than a third of its value this year, and the company now faces the risk of a credit rating downgrade.

John Williams, who leads the derivatives practice at law firm Milbank LLP, said investors are seeking ways to hedge their bets beyond credit default swaps. "There's so much investment going into it that it's just very appropriate to look for risk management tools, completely regardless of whether you're bullish or bearish," he said. "It would be crazy for people not to be looking for appropriate risk management tools for it."

Brian Stutland, portfolio manager at Equity Armor Investments, highlighted the interconnectedness of the market. "Can you drop a bowling ball in one part of the pool and not get any waves downstream to the rest of the Nasdaq?" he asked. "I have some concern about that."

Analysis

Why This Matters

The financial health of neocloud companies is central to the AI build-out; a downturn could slow infrastructure expansion and increase costs for AI development.
Widening credit default swaps and rising yields on corporate debt suggest that investors are demanding higher premiums, which may increase the cost of capital for both specialist and generalist tech firms.
Meta's negative free cash flow and the Solidigm IPO withdrawal indicate that even established players face financing challenges, potentially reshaping investment strategies across the sector.

Background

The AI boom has driven unprecedented demand for computing power, giving rise to specialist cloud providers known as neoclouds. These companies, often built around Nvidia's chips, borrow heavily to construct and lease data centers. The sector's heavy reliance on debt makes it sensitive to changes in investor sentiment and capital availability.

Key Perspectives

Nvidia CEO Jensen Huang: remains bullish, arguing that demand for neocloud capacity is outpacing supply and that the capital gap will eventually be resolved.

Roundhill Investments CEO Dave Mazza: says the sell-off is indiscriminate, with investors devaluing the entire neocloud category without distinguishing between individual companies.

Gartner analysts: predict that 80% of neocloud companies will either cease operations or be acquired by industry incumbents by 2030.

Brian Stutland, portfolio manager at Equity Armor Investments: expressed concern about potential contagion, asking whether a downturn in one part of the market could spread to the broader Nasdaq.

John Williams, derivatives lawyer at Milbank LLP: noted that it is prudent for investors to seek risk management tools regardless of their outlook on AI.

What to Watch

Credit default swap spreads for CoreWeave and other neoclouds: continued widening could signal a systemic capital crunch.
Upcoming third-quarter earnings reports from Alphabet, Microsoft, and Amazon, which will provide key data on hyperscalers' spending and financial health.
The status of Oracle's credit rating: a downgrade would mark a significant escalation of financial pressure in the AI infrastructure space.

Sources

Turmoil hits AI build-out as neoclouds face pressure, credit risks mount and Solidigm pulls IPO · CNBC

Checked

12 claims in this story checked against 1 source: 7 supported.

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SupportedThe AI infrastructure market is in turmoil, with neocloud shares plunging and credit risks mounting.US Top News and Analysis: “Turmoil hits AI build-out as neoclouds face pressure, credit risks mount and Solidigm pulls IPO.”
SupportedCoreWeave, Nebius and IREN each lost well over 30% in October.US Top News and Analysis: “Shares of neoclouds CoreWeave, Nebius and IREN all fell sharply this week, bringing their losses for October to well over 30% each.”
SupportedSK Hynix pulled the IPO for its Solidigm unit.US Top News and Analysis: “On Thursday, South Korean memory giant SK Hynix, one of the biggest winners in the AI boom, said it's pulling an IPO for its U.S.-based Solidigm unit, citing market volatility.”
Partly supportedMeta reported negative cash flow of over $2 billion in the third quarter and raised its full-year capex forecast from $130 billion to $135 billion.US Top News and Analysis: “Meta saw its stock plunge 7% on Thursday after the company reported negative free cash flow in the third quarter of over $2 billion while raising the floor of its full-year capex to $135 billion from $130 billion.”
Partly supportedThe sell-off reflects growing investor skepticism that returns from AI investment will justify the capital expenditure.US Top News and Analysis: “However, skeptics are getting more vocal in their concerns that returns on AI investment won't justify the capital expenditures.”
Partly supportedJensen Huang remains confident that demand will outpace capital availability.US Top News and Analysis: ““The demand of the capital is much greater than the availability of the capital,” Huang told CNBC’s Arjun Kharpal. “That’s going to get solved.””
SupportedCoreWeave's CDS spreads widened past 11%, and yields on its 2031 and 2032 unsecured notes topped 15%.US Top News and Analysis: “CoreWeave, the leader of the pack, has seen spreads on its CDS widen past 11%, generally viewed as a distress level, as investors have to pay up for protection against default. Meanwhile, yields on the company's 2031 and 2032 unsecured notes topped 15%.”
SupportedDave Mazza said investors were “throwing every baby out with the bathwater” and saying any neocloud “will be devalued.”US Top News and Analysis: ““What investors are doing is throwing every baby out with the bathwater and saying anyone who is a neocloud” will be devalued, Roundhill Investments CEO Dave Mazza told CNBC's “Squawk on the Street” on Thursday.”
Partly supportedHuang said both quoted remarks at the Berlin company conference.US Top News and Analysis: “Huang said this week at a company conference in Berlin that “demand for the neoclouds is off the charts.” “The demand of the capital is much greater than the availability of the capital,” Huang told CNBC’s Arjun Kharpal. “That’s going to get solved.””
Partly supportedMeta plans to spend about $825 billion on leases and contracts, with over $450 billion of those agreements non-cancellable take-or-pay.US Top News and Analysis: “Meta also said it plans to spend about $825 billion over the coming years on various leases and contracts, with over $450 billion of those leases being non-cancellable take-or-pay agreements.”
SupportedJohn Williams said it was appropriate to look for risk-management tools regardless of whether investors are bullish or bearish, and that it would be crazy not to look for them.US Top News and Analysis: ““There's so much investment going into it that it's just very appropriate to look for risk management tools, completely regardless of whether you're bullish or bearish,” Williams said. “It would be crazy for people not to be looking for appropriate risk management tools for it.””
SupportedBrian Stutland asked whether a bowling ball dropped in one part of the pool could send waves downstream to the rest of the Nasdaq, then said, “I have some concern about that.”US Top News and Analysis: ““Can you drop a bowling ball in one part of the pool and not get any waves downstream to the rest of the Nasdaq?” he said. “I don't know. I have some concern about that.””