Data center equities declined Tuesday after the initial public offering of South Korean cloud firm Elice fell more than 30% during its market debut overnight. The sharp drop in the stock, which has been compared to U.S. neocloud CoreWeave, signaled growing investor wariness toward artificial intelligence-dedicated computing power providers amid overcapacity concerns.
The negative sentiment extended to U.S. tech stocks, with CoreWeave shares losing 4% in premarket trading as of 8:08 a.m. ET. Peer companies also retreated, with Nebius down approximately 5% and Iren experiencing a similar decline. Vertiv pulled back 2% during the same period.
HSBC highlighted persistent risks for the sector in a Monday note, stating that challenges for the heavily levered CoreWeave are not going away. Analyst Abhishek Shukla wrote that debt market issues and moderating large language model revenues are exacerbating structural concerns for neoclouds. Shukla maintains a reduce rating on CoreWeave with a price target of $39, which implies 36.5% downside from current levels.