Treasury Secretary Scott Bessent told CNBC on Wednesday that he does not view neocloud debt as problematic, dismissing concerns that have sent investors fleeing the sector. Bessent said AI-related debt is "a small component of the overall ecosystem" and that financing and deals continue to get done. He noted that companies like Meta are choosing to finance with equity rather than debt.
Neocloud companies, which include CoreWeave and Nebius, provide cloud computing services to AI customers. Nebius signed a $17 billion-plus deal with Microsoft last September and announced a five-year Meta contract potentially worth $27 billion. Neocloud stocks have tumbled on investor worries about mounting debt levels, rising borrowing costs, and uncertain returns on AI spending. CoreWeave shares fell nearly 40% in October. The Roundhill Neocloud ETF has dropped 24% over the past month.
Elon Musk amplified concerns in an X post Sunday, claiming many neoclouds will face "guppy-level death and consolidation" and that debt markets are hesitant to fund companies relying almost entirely on AI data centers for revenue. Musk added SpaceX will not acquire any neocloud companies. Nvidia CEO Jensen Huang countered last week with a bullish view, telling CNBC that demand for neocloud services is "off the charts" and they have "extraordinary" capabilities.