Elice, a provider of AI-focused services spanning cloud computing equipment, training libraries, and business APIs, went public overnight. Reuters put the raise at $150 million and the valuation near $1.3 billion, but shares sank 30% on day one.
Investors have grown cautious toward providers of AI-dedicated compute, worried about overcapacity. That mood spilled into U.S. tech early in the session before some names rebounded.
CoreWeave fell about 4% just after Tuesday's open, then reversed to a 1.6% gain. By late morning, Nebius was down roughly 1%, and Iren was lower by about 4%.
Adding pressure, HSBC said Monday the issues facing highly levered CoreWeave persist. "Debt market woes and moderating LLM revenues are exacerbating structural concerns for neoclouds," analyst Abhishek Shukla wrote. Shukla rates CoreWeave reduce with a $39 price target, implying 36.5% downside.
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Pressure on neoclouds picked up earlier this month after private AI algorithm companies reported softer revenue and higher interest rates tightened the screws. Anthropic's growth rate decelerated markedly: it was 140% during Q2, but only 45% in Q3. OpenAI also underdelivered, with revenue coming in $20 billion below what analysts expected, according to Wolfe analyst Stephanie Roth in a Sunday note.
Advisory firm Gartner last week projected that 80% of neocloud providers could cease independent operations by 2030. "Our research indicates that enterprise and consumer AI revenue will be insufficient to support profitable returns on all planned AI capital expenditures" between 2027 and 2030, said Gartner's Will Sommer, a senior director analyst. In a Monday CNBC interview, Gartner reiterated its stance. Chief forecaster John Lovelock said, "At the moment, we have more compute capacity than we have demand, and we have a lot of the tokens and processing power being given away in freemium solutions," and added, "Pretty much every market that Gartner is tracking in our AI race is likely to collapse down to a duopoly."
A shaky Elice debut, slower growth at major AI developers, and tighter financing all point to AI infrastructure building faster than near-term demand. For your portfolio, that translates to quick swings in names tied to AI compute as demand signals, funding costs, and new analyst calls reset expectations.
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