Shares of IREN Ltd. (NASDAQ:IREN), CoreWeave Inc. (NASDAQ:CRWV) and Nebius Group N.V. (NASDAQ:NBIS) fell more than 2% in Monday’s premarket trading, extending the selloff in artificial intelligence infrastructure stocks. Applied Digital Corp. (NASDAQ:APLD) also faced selling pressure amid mounting concerns over debt and construction costs.
Analyst Warns Delays Could Destroy Neoclouds
Market commentator Nicholas Mugalli warned that rising penalties for delayed data centers could threaten heavily indebted neocloud operators, even as demand for AI computing remains strong.
"$5M/day late penalties prove two things that @elonmusk has been talking about when it comes to Neoclouds," Mugalli wrote Monday on X.
"Extremely bullish for demand. The ROI on active compute is so high that downtime is an existential threat," he explained, citing reports that customers now demand penalties exceeding $5 million daily for delayed facilities, compared with approximately $1 million previously.
Mugalli estimated construction and equipment costs at $57 million per megawatt, including $37.5 million for servers.
"Huge tailwind for power and cooling infrastructure. Death sentence for slow developers," he warned.
Musk Predicts Widespread Neocloud Industry Shakeout
Mugalli’s comments follow Musk’s warning about the tightening neocloud financing market.
Musk said debt markets had "almost entirely shut off access to money" for companies lacking substantial revenue outside AI data centers. He predicted "guppy-level death and consolidation" among more than 200 neocloud providers.
Space Exploration Technologies Corp. (NASDAQ:SPCX) on Sunday secured $40 billion in financing for Nvidia Corp. (NASDAQ:NVDA) GPUs, highlighting the industry’s enormous capital requirements.
Financing Pressures Mount Despite Strong Demand
Mugalli argued that SpaceX’s rapid Memphis data center development offered a competitive advantage, while warning that using GPUs as collateral might no longer secure sufficient financing.
The concerns echo earlier warnings about CoreWeave’s borrowing costs and Nebius’ exposure to AI infrastructure financing risks.
Reuters separately reported Thursday that short sellers earned approximately $6 billion in unrealized October profits across five AI infrastructure stocks, including Applied Digital.
Photo courtesy: Shutterstock