Here’s why TeraWulf, CoreWeave, and Nebius stocks are falling

Top neocloud stocks are falling this week, erasing some of the gains they made last week when many of them published strong financial results. Nebius stock plunged to $241 from this month’s high of $280. Similarly, CoreWeave and TeraWulf tumbled to $93 and $15.62, respectively. 

TeraWulf, CoreWeave, and Nebius stocks amid AI bubble fears

The ongoing WULF, CRWV, and NBIS stocks crash has happened because of the ongoing technology sell-off amid the rising bond yields. Nvidia, the posterchild of the AI boom, dropped to $219 from this week’s high of $227. Other top names like AMD, Oracle, and Broadcom also plunged.

The main reason behind the sell-off was the rising US bond yields, with the 30-year rising to its highest level in over two decades. Investors are concerned about the state of the US economy as public debt surges and as the US-Iran war moves to a stalemate. 

At the same time, investors are concerned about a potential AI bubble. Michael Burry, who accurately predicted the Global Financial Crisis, has called the bubble and shorted some of the top companies in the industry, including Nebius. 

He is not alone as TeraWulf, Nebius, and CoreWeave have short interests of 23%, 25%, and 13%, respectively. In a report on Tuesday, the European Central Bank warned that a market correction was possible amid the AI boom. 

Still, some analysts warn that the fears of an AI bubble were overblow, noting that the top companies in the industry were seeing strong growth. For example, Anthropic made over $11 billion in the second quarter, with its annualized revenue run rate reaching $65 billion.

OpenAI’s revenue rose by 18% in the second quarter to $6.7 billion. While this growth disappointed its investors, the management noted that the revenue is accelerating in the third quarter. 

Top neocloud companies released strong results

Top neocloud companies published strong financial results. TeraWulf’s revenue dropped to $71 million in the second quarter from $47 million in the same period last year. 

This retreat was because of the ongoing Bitcoin price retreat and as the company continues to pivot towards AI data centers. Its AI business is doing well as evidenced by its 20-year deal with Anthropic worth nearly $19 billion. The deal will be extended to $33 billion if it extends it by five years.

CoreWeave also released strong numbers, with its revenue jumping by 112% to $2.6 billion and its adjusted EBITDA growing to $1.5 billion. Nebius said that its quarterly revenue jumped 454% to $582 million.

Analysts expect revenues of the three companies to accelerate. CoreWeave is expected to make $12.8 billion this year and $26 billion next year. Nebius, on the other hand, is expected to make $3.4 billion and $11.9 billion in the next two respective years. TeraWulf’s revenue will jump to $270 million and $905 million in this period. 

The challenge, however, is that the cost of doing business is still elevated, with the prices of GPUs, memory, servers, and optical equipment soaring. As a result, they will need to raise substantial sums of money through debt and equity to fund this growth.