The "New Cloud" model faces new challenges! Meta "transforms from benefactor to competitor" as CoreWeave bonds fall for two consecutive days, raising concerns
Meta plans to build its own cloud computing business, directly competing in the AI computing power market, raising concerns about the prospects of "new cloud" companies like CoreWeave. As a result, the prices of the €2 billion euro-denominated high-yield bonds and the $1.25 billion dollar bonds issued by CoreWeave last month fell for two consecutive days, reaching approximately 96.8 and 97.3, respectively. Analysts point out that the business model in this field is novel, risks are concentrated, and long-term profit margins are unclear, having yet to undergo a real test
According to the Zhitong Finance APP, CoreWeave (CRWV.US), an AI infrastructure company, saw its bonds decline for the second consecutive day last month, following reports that Meta Platforms (META.US) is planning to build its own cloud computing business, which has put pressure on both its stock price and bonds.
In the past two trading days, the price of CoreWeave's euro bonds has dropped nearly 2 points to 96.8. This issuance, amounting to €2 billion (approximately $2.3 billion), marks the first euro-denominated high-yield bond issued by a U.S. AI infrastructure company. Similarly, the $1.25 billion dollar bond issued in June also fell about 1.3 points to 97.3 by Wednesday's close.
The recent decline stems from Meta's announcement that it is developing cloud computing infrastructure to provide AI computing power and model services, directly competing with giants like Amazon (AMZN.US) AWS, Microsoft (MSFT.US) Azure, and Google (GOOGL.US) Cloud, thereby posing a threat to the growth prospects of "new cloud" companies like CoreWeave.
CoreWeave has not yet responded to requests for comment.
Mark Remington, a portfolio manager at EFG Asset Management, commented: "These AI concept stocks have not yet undergone a real test." He did not provide specific views on CoreWeave but noted, "The business models in this field are novel, risks are concentrated, and long-term profit margins are unclear, making assessment quite challenging."
Unlike traditional hyperscale cloud service providers, "new cloud" companies focus on the niche area of AI cloud infrastructure. CoreWeave, once a cryptocurrency miner, is now known for on-demand leasing of high-performance graphics processing units (GPUs) and is one of the most representative companies in the industry.
Another "new cloud" company, the Dutch firm Nebius NV (NBIS.US), saw its convertible bonds maturing in March 2031 drop about 21 points to 152 cents following the Meta news. Notably, both CoreWeave and Nebius have lucrative contracts with Meta.
Alexander Fad, a bond portfolio manager at Fisch Asset Management, pointed out: "The AI arms race is quietly moving towards consolidation." He further stated that Meta has shifted from being a customer of "new cloud" companies like CoreWeave and Nebius to becoming a competitor, "which greatly increases the difficulty of assessment from both credit and equity perspectives."
