During trading on October 14, investors staged a massive sell-off of stocks tied to artificial intelligence infrastructure.
Shares of cloud provider Nebius Group, founded by Arkady Volozh, plunged more than 10%. Its competitor CoreWeave fell even further, losing nearly 17%. Shares of cloud hosting provider DigitalOcean and data center operators Applied Digital, Hut 8, IREN, and Cipher Digital dropped 10–16%.
The sell-off was preceded by a report from analytics firm Gartner, Seeking Alpha writes. Gartner analysts suggested that more than 80% of neocloud providers may not survive as independent companies beyond 2030 if spending on AI infrastructure continues to grow at a rapid pace.
Additional pressure on CoreWeave shares came from rising borrowing costs. Venture capitalist Chamath Palihapitiya posted a chart on social media platform X showing that the yield on CoreWeave bonds maturing in 2032 had reached 15%. “Is the buildup of AI infrastructure creating a bubble in the private credit market?” the investor wrote. The post caught the attention of X owner and the world’s richest person, Elon Musk, who commented: “Uh-oh.”
CoreWeave CEO Mike Intrator called market behavior “irrational” in a memo to employees and emphasized that he remains confident in the company’s prospects, Bloomberg reported.
What the Gartner report says
AI infrastructure providers are expected to spend nearly $1 trillion on it in 2026 and another $6 trillion between 2027 and 2030, Gartner analyst Will Sommer noted.
“However, our research shows that AI revenue in the enterprise and consumer segments will not be sufficient to ensure a profitable return on all planned AI capital expenditures during this period,” he said.
According to Gartner, the AI infrastructure industry needs to generate a cumulative $8.5 trillion in revenue by 2030 to cover capital expenditures and debt-servicing costs and deliver a target return on invested capital (ROIC) of 12%. Gartner uses this as the minimum return threshold for investments.
Data center revenue is projected to reach just $3.6 trillion by then, leaving a $4.9 trillion shortfall. Moreover, since most AI services operate under asset-light business models, Gartner expects less than half of AI revenue to go to infrastructure owners—that is, neocloud providers. Gartner believes that cloud giants Amazon, Google, and Microsoft are better positioned thanks to their diversified revenue streams, while neocloud providers face greater risks.
If investment continues at its current pace, more than $4 trillion in assets could be at risk of being written off by 2032, and the target 12% return on invested capital will not be achieved until at least the end of 2032, Gartner estimates. Spending on specialized AI infrastructure as a service (IaaS) is forecast to rise from $66 billion in 2027 to $174 billion by 2030. However, this growth will not be enough for most AI providers to recoup their investments before the next generation of chips arrives, Sommer warned.
Background
Concerns about the sustainability of neocloud providers’ business models had been raised before. In September 2026, Rothschild & Co Redburn analyst Alex Haissl assigned “sell” ratings to the shares of Nebius, CoreWeave, and hyperscaler Oracle, citing the sector’s structural vulnerability and rising borrowing costs for companies with less reliable counterparties.
In summer 2026, Moody’s Ratings warned that the race to build AI infrastructure threatened the credit profiles of CoreWeave and major technology companies. The agency estimated their combined data center lease obligations at $1.2 trillion. Well-known short seller Jim Chanos also noted that most neocloud providers lack a sustainable business model and a clear path to profitability.ㅤ