Tech investors are increasingly worried about correction of an “AI bubble” similar to the dot-com bubble pop of the 1990s. Adding to their concerns: popular resistance to the construction of new data centers, as manifested in the victories voters awarded on November 3 to candidates pledging closer scrutiny of the AI industry.

AI debt
November 1

A once-obscure corner of the AI ecosystem finds itself in the spotlight—and investors don't all like what they see.

Names like CoreWeave and Nebius are familiar to the tech set in San Francisco and Silicon Valley. These data centre companies, known as neocloud firms, run large warehouses packed with expensive computers, which they lease to major AI developers like Anthropic, OpenAI and Meta.

They're now the subject of one of Silicon Valley's most heated debates. Many question whether neocloud firms are financially sound and what their recent stumbles tell us about the state of the AI economy.

Analysts at Gartner predict by 2030, 80% of neocloud firms will "cease independent operations", while Forrester's experts expect at least three of them to be imminently acquired "as finances get shaky".
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Neocloud firms often finance themselves by signing long-term lease contracts with major tech customers who need quick access to computing power.

Firms can then borrow money using those contracts – plus the AI chips they purchase—as collateral, explained analyst Cory Johnson of "The Quiet Period" IPO research outfit. He said debt is common across neocloud firms because the hardware has to be paid for up front.
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"This helps explain how CoreWeave accumulated $35.1bn (£26.3bn) in debt," he said.

Some jittery investors appear to be having second thoughts. CoreWeave stock has lost a quarter of its value over the past month, and it's not alone. Shares in other neocloud firms like Nebius, IREN, and Applied Digital have all shed about that much if not more during the same period.

Debt investors also appear spooked, and are demanding ever-higher returns from several firms in the sector.
....

https://www.bbc.co.uk/news/articles/cje36degrgv5o



AI scrutiny
November 5

As other stocks rose, tech and AI sectors took a big hit after the Blue-nami on November 3. US voters rewarded candidates who campaigned on slowing AI data center construction.

US midterm elections sparked concerns of a slowdown in artificial intelligence development.

The tech-heavy Nasdaq composite index closed down by more than 5.5%, losing an estimated $2.5tn (£1.9tn) in market value, according to Dow Jones data, while other key US stock indexes also saw big losses in their worst days since 2025.
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In total, the so-called magnificent seven tech companies, including Apple, Nvidia and Tesla, have shed a trillion dollars in value in a single trading day.
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The sell-off comes on top of broader concerns about whether the huge amounts being spent on AI will pay off.
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Democrats in races across the US campaigned to slow the growth of data centres and AI, and there were dozens of measures on ballots around the country aimed at restricting the development of the hubs crucial for powering the technology.

They won both the US Senate and House of Representatives in Tuesday's midterms, taking control of Congress for the rest of President Donald Trump's presidency.

Texas' Democratic governor-elect Gina Hinojosa campaigned heavily against data centres, pledging a moratorium on new construction in the sector.
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Shares in companies heavily exposed to AI data centres, including crucial chipmakers and semiconductor manufacturers, fell sharply on Thursday, highlighting investor concerns that had already been growing.
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Susannah Streeter, chief investment strategist at Wealth Club, said "Fears that the vast sums poured into AI infrastructure may not deliver the returns investors have been banking on are now colliding with the prospect of a sharp slowdown in data centre construction."

Greater scrutiny of data centre approvals, and their impact on the environment and electricity bills could delay projects and raise costs across the industry, said Charu Chanana, Chief Investment Strategist at Saxo. While both political parties are keen to ensure the US' dominance in the technology, "there is a difference between supporting AI development and allowing infrastructure to expand at any cost or pace," she said.

https://www.bbc.co.uk/news/articles/cmn04705rd8jo

Utter bullshite from the Brits

There's already a thread related to this. You couldn't have posted it there? (Of course not.)