GOOGL, MSFT AI Capex Worries Hammer Neocloud Stocks: CRWV, NBIS, IREN, APLD Give Up Best Week in Over 2 Months

Shares of AI infrastructure providers tumbled Thursday pre-market after Microsoft Corp. (NASDAQ:MSFT) and Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) reported quarterly capital spending below Wall Street expectations, reviving concerns about the pace as well as sustainability of hyperscaler spending that has fueled the artificial intelligence boom.

Neocloud Stocks Give Up Strong Weekly Gains

CoreWeave Inc. (NASDAQ:CRWV) fell about 5% in Thursday’s pre-market trade, Nebius Group NV (NASDAQ:NBIS) dropped 6%, IREN Ltd. (NASDAQ:IREN) declined 4% and Applied Digital Corp. (NASDAQ:APLD) slid 4%, according to Benzinga Pro data.

The declines erased a significant portion of what had been a strong week for the AI infrastructure stocks. CoreWeave had been on track for its best week in 11 weeks, while Nebius was heading toward its strongest weekly performance in 10 weeks.

IREN was similarly on pace for its best week in seven weeks, while Applied Digital had been headed for its strongest week in 23 weeks.

The sharp reversal highlights how sensitive the neocloud trade has become to signals from the largest AI infrastructure spenders.

Microsoft, Alphabet Capex Fall Short of Estimates

The selloff came after Microsoft and Alphabet both reported quarterly capital spending below Wall Street expectations.

Microsoft reported $45.2 billion in capital expenditures and finance leases for the quarter, roughly 30% higher than a year earlier but below the $50.7 billion average analyst estimate, according to StreetAccount as cited by CNBC.

Alphabet also came in below expectations, reporting $51.36 billion in capital expenditures versus the $55.09 billion analysts had expected.

While both companies continue to spend enormous sums on AI infrastructure, the misses have raised questions about whether hyperscalers can sustain the explosive pace of spending that has underpinned demand for neocloud providers.

Elon Musk’s Neocloud Shakeout Warning in Focus

The concerns come as investors are already questioning the financing model behind the AI infrastructure boom.

Market commentator Nicholas Mugalli recently warned that data-center delays and soaring construction costs could create an existential challenge for highly leveraged neocloud operators. He cited reports of customers demanding late penalties exceeding $5 million per day, up from roughly $1 million previously.

Tesla Inc. and Space Exploration Technologies Corp. (NASDAQ:SPCX) CEO Elon Musk separately warned that debt markets have “almost entirely shut off access to money” for companies without substantial revenue outside AI data centers.

He predicted “guppy-level death and consolidation” among more than 200 neocloud providers.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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