Most companies borrow against buildings or steady cash flow. In August 2023, CoreWeave Inc. (CRWV) borrowed against computer chips. The $2.3 billion debt facility was backed by Nvidia Corp. (NVDA) processors, Reuters reported then.
CEO Michael Intrator called borrowing against those chips “a very cost effective way to access the debt markets.” That approach became a template for neoclouds, the companies that rent AI computing power to tech firms.
Over the past year, lenders showed “unbridled enthusiasm to provide debt to neoclouds,” Ropes & Gray finance partner Chris Poggi told Reuters.
That enthusiasm is fading. Some banks that lined up to fund AI deals weeks ago now say they would hesitate to finance more.
The pullback is especially pronounced among neoclouds. A $2.5 trillion Nasdaq 100 selloff on Nov. 5, made it worse, according to Reuters.
Also read: CoreWeave appears to have a lender problem, not a customer one
Lenders now want to know who can walk away
Lenders are also scrutinizing contract details, Reuters noted, including:
- Service obligations spell out what a neocloud must deliver.
- Operational deadlines set when new capacity must go live.
- Exit conditions define when a large tech customer can reduce or end its commitment.
That last point may matter most, because neoclouds borrow against customer contracts. CoreWeave reported a revenue backlog of about $104 billion at the end of June, according to its second-quarter earnings release. A backlog protects a lender only if the customer cannot easily leave.
Microsoft Corp. (MSFT) accounted for about 67% of CoreWeave’s 2025 revenue, according to its annual report. Microsoft plans to use fewer neocloud partners, CNBC reported.
Intrator wrote on LinkedIn that he does not currently expect political shifts to affect CoreWeave’s existing commitments or backlog, CNBC reported. The bond market is less sure.
Cheng Xin / Getty Images
3 neoclouds face 3 different debt problems
CoreWeave’s interest bill dwarfs its operating profit
CoreWeave’s mistake was funding rapid growth with expensive debt. It carried about $35.1 billion of debt at the end of June against $5.5 billion of cash, according to its earnings release. Its second-quarter interest bill of $640 million was five times its $128 million adjusted operating income, the release showed.
The yield on its 2032 notes climbed above 16%, according to CNBC. Freedom Capital Markets analyst Paul Meeks called the dynamic “a self-fulfilling prophecy, a doom cycle,” CNBC reported. Worried creditors charge more, which gives them more to worry about.
The stock is down 35% this year. It trades at about 3.4 times trailing sales, according to StockAnalysis. Analysts still rate it a Buy on average, with a $131.53 target, though Wells Fargo cut its target to $115 from $160 on Nov. 9.
Morningstar analyst Luke Yang told CNBC that CoreWeave can fund existing contracts but needs fresh capital to grow. Its Nov. 10 report should show whether operating profit is catching up with interest costs.
Nebius shelved a bond and took a one-year loan
Nebius Group N.V. (NBIS) avoided CoreWeave’s debt load partly by selling stock at high prices. It raised about $2.8 billion at an average of $223.60 per share through June, according to its second-quarter filing.
Its misstep was timing. Nebius explored a high-yield bond in September, then dropped the plan last month, according to Reuters. It took a $3.5 billion Citi loan in October, with a margin that steps up every 90 days to a cap.
COO Ophir Nave said the deal showed “our ability to choose when and how we raise capital.” Yet the loan matures in a year, a bridge to longer financing in a cautious market.
Like CoreWeave, it has lost about half its value in a month, CNBC reported.
Nebius is worth about $35.5 billion, more than CoreWeave, on less than a fifth of its trailing revenue, according to StockAnalysis. The 22 analysts tracked by StockAnalysis rate it a Buy with a $278.05 average target. The Nov. 12 report needs to show a path to longer-term debt.
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Oracle borrows like a neocloud but still earns billions
Reuters, citing Baird Equity Research, grouped Oracle Corp. (ORCL) with CoreWeave among neocloud companies that could be hit by construction delays or moratoriums.
Midterm voters rejected data centers in 40 of 41 ballot measures, CNBC reported.
The decades-old software giant’s mistake was borrowing like a neocloud. Oracle carried $125.3 billion of debt at the end of August, according to its bond prospectus. The same filing shows its new $10 billion bond sale paying coupons of 7% to 8.65%.
S&P rates Oracle one notch above junk, and Oracle does not expect positive free cash flow until the second half of 2028, CNBC noted.
Oracle’s cushion is profit: It earned $18.7 billion over the past year, according to StockAnalysis. Shares ended last week about 54% below their 52-week high. They trade at 13.6 times forward earnings, and 42 analysts rate it a Buy, with a $235.77 average target.
The next loan will decide the next data center
Lenders with full books are likely to ration money, favoring borrowers with income beyond AI data centers. That leaves CoreWeave and Nebius most exposed to the doom cycle Meeks described.
Neoclouds grew because lenders treated chips and contracts as safe collateral. Their next phase depends on who can still borrow against them.
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