Neocloud computing companies are diving today after a report said that Mark Zuckerberg’s Meta was planning to enter the industry. CoreWeave’s stock price dived to $86.62, its lowest level since April 9, down 38% from its May high.
CoreWeave, Nebius, and IREN Stocks Dived After Key Meta News
Similarly, Nebius stock has entered a technical bear market after falling 20% from its June high. IREN stock tumbled to $43.25, down by nearly 40% from the year-to-date high.
The retreat in these neocloud stocks was triggered by a Bloomberg report noting that Meta Platforms was building a cloud business to sell its excess capacity to other hyperscalers. This is major news for these neocloud companies, as it suggests they may be about to lose a large customer. Meta has already inked a $27 billion deal with Nebius.
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At the same time, it means competition is rising in the industry, which will reduce their leverage when negotiating contracts with other companies like Google and Microsoft.
Competition has been growing in recent months, with most Bitcoin mining companies, including Mara Holdings, Hive Digital, Cipher Mining, TeraWulf, and Hut 8, entering the industry.
Most importantly, SpaceX has also moved into space. It recently secured a major contract with Google, which will pay it $950 million per month. Reflection AI has started paying it $150 million a month, while Anthropic is paying it $1.25 billion a month.
CRWV, IREN, and NBIS are Facing More Challenges
CoreWeave, IREN, and Nebius are also facing other challenges, which explains why investors have taken short positions in the companies. CRWV has a short interest of 15%, while Nebius and IREN have short interests of 23% and 18%, respectively.
For example, the cost of memory and GPUs continues to rise this year because of the supply crunch. This surge is straining their already thin balance sheets, raising concerns that they will dilute their shareholders.
There are also concerns about their soaring depreciation costs, which may remain elevated as newer chips are released. For example, IREN’s depreciation soared to $445 million last quarter, while CoreWeave’s jumped to $4.8 billion. Nebius had over $844 million in cash, a significant amount given its revenue of $400 million.
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