AI Circuit's $5.5 billion IPO subscription is getting cold! Nvidia-supported Firmus pricing is difficult to produce, and AI financing is showing rift

The Zhitong Finance App noticed that the IPO demand for a data center company supported by Nvidia (NVDA.US) suddenly collapsed, revealing a new rift in the AI financing boom.

According to people familiar with the matter, Australia's planned US$5.5 billion listing of Firmus Grid Ltd. is already shrouded in uncertainty because the deal failed to attract sufficient subscription support for the proposed share price of 11 Australian dollars.

People familiar with the matter said that just a few days after the company stated that the subscription intention it had obtained far exceeded the distribution scale and was expected to reach a valuation of 30 billion US dollars, some investors became cautious.

Firmus closed its bookkeeping on Thursday, but has so far made no clear statement on pricing or transaction structure. This unusual communication vacuum has fueled market speculation that the issue price may be lowered, or even the IPO may be completely cancelled.

The deal highlights a growing concern about how much capital AI infrastructure companies are requesting from the open market at a time when borrowing costs are rising. Firmus' valuation is largely based on the company's ability to successfully build data center pipelines and serve customers such as Meta (META.US) and OpenAI in Asia. Currently, it only operates two data centers, and the IPO fund-raising is to fund the construction of a larger network.

Maxence Visseau, chief investment officer of multi-strategy investment firm Arkevium Capital in Dubai, said, “Investors still believe in AI,” and “they won't pay any price for companies that burn money in data centers, rely on a few big customers, and promise profits only after many years.”

According to discussions with at least 10 investors and advisors, the market's concerns about Firmus include lack of verified performance records, overvaluation, and the risk that existing shareholders may sell shares after listing. About 58% of the shares can circulate freely from the first day of listing. Increased regulatory scrutiny and tighter financing conditions faced by data centers were also seen as impediments.

Unisuper, one of Australia's largest pension funds, is one of the institutional investors that did not participate in this IPO.

Its chief investment officer John Pearce said in an investor update released on Thursday, “We think Firmus does have a fascinating story, but it just doesn't have a compelling valuation.” “Too many things must be done to support this valuation.” He also said that the fund is concerned that Firmus will have to continue borrowing and issuing additional shares to finance the expansion plan.

“Investors are getting nervous,” said Phil Wool, head of portfolio management at Rayliant Global Advisors. “Firmus would have been one of the biggest IPOs in Australian history. Seen from this perspective, this is a historic failure.”

Firmus was founded by Oliver Curtis, Tim Rosenfield, and Jonathan Levee in 2019 and began as a Bitcoin mining company. Curtis once served a prison sentence for insider trading. Earlier this year, as the IPO prospects gradually became clear, the company became tabloid material, partly due to Curtis' criminal history and his partner being a well-known socialite and PR executive Roxy Jacenko.

Globally, investors are beginning to question the ambitious goals and exorbitant pricing of AI projects. Last month, the US listing price of data center company Accelevation Holdings Corp. was below the recommended range. As the boom surrounding memory chip makers Samsung Electronics and SK Hynix receded, the Korea Composite Stock Price Index has fallen 27% from its June high.

Warnings about inflated valuations are getting louder and louder. Billionaire Dalio said this week that AI is a “classic bubble” and that the bubble is close to bursting due to huge debts to finance the technology and rising interest rates.

Michael Burry, famous for shorting the US property market before the financial crisis, posted on X on Tuesday that the stock market “is clearly in the first stage of grief: denial. Referring to 2000 and 2008, this phase will last 6 to 9 months”.

Bain & Company predicts that by 2031, the AI industry will need to achieve annual revenue of 6 trillion US dollars to prove that the capital currently invested in building data centers is reasonable.

Investors' doubts

At the beginning of August this year, Firmus was valued at $10.5 billion after a round of financing involving Jane Street and the Blackstone Group (BX.US), which meant it was trying to nearly triple its valuation within two months.

According to investor documents, the Australian company's revenue for the 2026 fiscal year is 51 million US dollars. It plans to use hardware from supporter Nvidia to build its data center called the “AI factory”. The pipeline size is 912 megawatts, but currently only 46 megawatts have been built.

“The market has a lot of doubts about this IPO,” said Jun Bei Liu, co-founder and chief portfolio manager of Ten Cap Investments. “The challenge is that most of those data centers haven't been built yet.”

Businesses are facing increasing resistance when building data centers. Oracle (ORCL.US) invoked a force majeure clause in late September regarding its New Mexico data center project. Olivia Wassenaar, head of infrastructure at Apollo Global Management, said on Wednesday that the company is working to ensure that the AI infrastructure deal it has funded does not derail due to local opposition.

Some AI cloud companies are turning to high-risk debt financing. JPMorgan Chase (JPM.US) and Bank of America (BAC.US), Morgan Stanley (MS.US), and Morgans Financial are co-leading managers of Firmus's listing. At the same time, J.P. Morgan is also promoting a yield of about 11% for Volta Infrastructure Holdings Ltd.'s $5 billion leveraged loan sale to finance a data center complex in Norway.

Maas Group holds Firmus shares and has at least AU$855 million in electrical infrastructure contracts linked to its construction projects. Affected by the worrying fate of the Firmus IPO, Maas Group's stock price plummeted 30% to the biggest drop in history in Sydney on Thursday, then narrowed to 22%. Maas Group said that there is “a lot of speculation and comment” in the market about whether the proposed IPO can proceed.

What was supposed to be a blockbuster stock offering is turning into a lesson in arrogance. However, according to KKR (KKR.US) estimates, it will take 8 trillion US dollars to complete global AI construction, and the pressure for corporate financing will only increase. This includes Anthropic, which plans to launch a mega-IPO next month as soon as next month.

“As the market's enthusiasm for AI topics peaked, investors are struggling to calculate how much future growth will be needed in the past few years to make financial sense. I don't think this will be the last disappointing AI-related IPO,” said Rayliant's Wool.