CoreWeave jumped more than 20 per cent on Wednesday, igniting a rally in battered AI cloud stocks, as its hefty spending yielded strong revenue growth and the company signaled a pullback from the borrowing binge that had set off alarms of an AI bubble. The earnings also helped lift shares of key CoreWeave backer Nvidia by two per cent, after a bruising two-day slide driven by worries about CEO Jensen Huang’s future at the company following his affair with a Chinese businesswoman alleged to be a spy for Beijing. Shares of so-called “neoclouds” including Nebius and Iren rallied after facing weeks of turmoil on fears that their debt-fuelled data centre expansion could backfire if AI demand slows. “CoreWeave’s earnings directly addressed the fear that’s driven this whole selloff,” said Dan Sheehan, director of portfolio management at Telos Wealth Advisors. “The neocloud that became the poster child for AI financing worries took real weight off the fear that had been the heart of the selloff.” The Democratic midterm sweep last week had dealt a blow to the industry, with several winning candidates campaigning for tighter regulation and moratoriums on new data center construction, including in the crucial market of Texas. CoreWeave CEO Michael Intrator told Reuters on Tuesday that greater scrutiny could slow data center construction across the industry, but he did not expect it to significantly alter the company’s expansion plans or drive up costs. There will be no impact to CoreWeave’s planned capacity additions over the next year, he added. The company also said it would not tap unsecured debt markets after a recent spike in borrowing costs, and that cash flow from existing contracts would cover both current and future debt repayments, a financing plan that analysts said was credible. “CoreWeave delivered about the best quarter we could have asked for. Stats were good-to-great, funding concerns were addressed and the strategic moves make sense,” Bernstein analysts led by Madison Rezaei said in a client note. But they warned that CoreWeave “will be among the first and hardest hit” when the crunch in AI computing capacity eases. The risks of mistiming AI investments became evident on Tuesday as SoftBank took a US$3.7 billion writedown on non-refundable payments for equipment to power its U.S. data centres, driving a second-quarter net loss of $7 billion, its first in nearly two years. Nvidia boss Huang’s troubles have left the AI industry reeling too, with the controversy escalating on Tuesday as allegations emerged that his relationship aided multi-billion-dollar Nvidia chip shipments to China. Republican U.S. Senator Kevin Cramer from the Senate Banking Committee called on Huang to step down as CEO. For now, CoreWeave’s results have given investors in AI infrastructure stocks reason to cheer, with Nebius, Iren, Oracle and Applied Digital climbing between six per cent and 14 per cent. All the stocks but Nebius have lost 32 per cent to 48 per cent this year as of Tuesday, while Nebius has surged 60 per cent. Together, the companies, including CoreWeave, were set to gain some $36 billion in market value, while Nvidia alone stood to add nearly $100 billion, if current gains hold. Nebius is due to report results before Thursday’s opening bell. (Reporting by Aditya Soni in Bengaluru; Editing by Devika Syamnath)
