Nebius CEO Admits Neocloud Financing Has Tightened, Says Company Has Enough To Build Its Gigawatt

(MENAFN- AsiaNet News)

• Nebius secured a $3.5 billion debt facility from Citi to fund data center expansion and GPU purchases.
• Elon Musk warned of“guppy-level death and consolidation” in the sector, saying debt markets have largely shut out companies lacking substantial revenue beyond AI data centers.
• NBIS has fallen about 33% this month.

Nebius Group (NBIS) CEO Arkady Volozh acknowledged that neocloud companies are finding it harder to raise debt, as pressure mounts on their shares amid concerns about their business models and reliance on leverage.

An excerpt from Volozh's vodcast on the sidelines of Nvidia's GTC conference in Berlin last week was making rounds on X on Sunday. Volozh said some sources of capital had temporarily dried up, including “asset-backed financing or debt markets,” but Nebius had enough funding to deliver its planned capacity expansion.  

“We have a pretty healthy balance sheet. We always thought about being more conservative here,” Volozh said.“But we're working now with customer advances and several other instruments, which will probably provide us enough finance to build this gigawatt at least.”

His comments come as investors grow increasingly concerned about the debt needed to finance the industry's rapid expansion. Neocloud providers build and rent out computing infrastructure, largely powered by Nvidia GPUs, to companies developing and running AI models. 

The business requires substantial upfront investment in chips and data centers, while returns depend on securing customers and generating sufficient revenue to cover financing and operating costs.

Nvidia-backed Nebius has been expanding its capacity to meet two large contracts from Microsoft (MSFT) and Meta Platforms (META).

Elon Musk Warns Of Neocloud Failures

NBIS shares slid 4% last week and fell further in overnight trading late Sunday after billionaire entrepreneur Elon Musk said the sector will see“guppy-level death and consolidation” and that his rocket and AI firm, SpaceX, has no interest in buying a neocloud company. 

Musk said that debt markets had almost entirely shut off access to financing for companies without substantial revenue independent of AI data centers, adding that SpaceX does not fall in that category and in fact secured $40 billion in debt recently to purchase Nvidia GPUs.

Ed Zitron, AI critic and CEO of EZPR media relations agency, said the latest comments are particularly ominous for CoreWeave (CRWV).“Okay that's two guys who have said it now, if this is really the case coreweave is toast outside of whatever plan Blackstone can concoct,” he wrote in an X post.

Nebius Secures $3.5B Debt Financing For Expansion

Nebius said on Thursday it secured a $3.5 billion debt facility from Citi to fund its data center expansion and GPU purchases. The loan matures in October next year and will also support general corporate purposes.  

The financing comes as investors scrutinize the debt-heavy expansion plans of AI infrastructure providers amid a broader sell-off in neocloud stocks.  

“Sequencing our financing is how we optimize our long-term cost of capital,” Chief Operating Officer Ophir Nave said.“We still have a range of capital sources available to us to finance the next phase of growth,” he said, adding that the company has $40 billion in long-term customer contracts that could serve as collateral. 

Retail View On NBIS 

Neocloud companies, including CoreWeave and IREN, were among the top trending stocks on Stocktwits late Sunday, all with a 'bullish' retail sentiment reading.

“$NBIS If you had even half a brain and did some real number crunching here you would know. Anybody betting against this company in the next 12 months must want to stay poor,” a trader said.

NBIS has lost about 33% so far this month; its year-to-date gain is 90%.

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