CoreWeave and Nebius AI Cloud Companies Face Financial Risks
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The Dark Side of AI’s Cloudy Future
BCA Research strategist Noah Weisberger has issued a warning about the unsustainable debt taken on by neocloud companies like CoreWeave (CRWV) and Nebius (NBIS), which are building commoditized computing services with razor-thin profit margins.
This is not just a problem for these specific companies, but also a symptom of a broader issue in the tech industry’s current trajectory. The rapid growth of AI cloud companies has led to unprecedented investment, much of it fueled by borrowed money. This raises questions about the sustainability of such business models and whether investors are chasing growth without considering potential risks.
CoreWeave’s financials tell a striking story: despite more than doubling its revenue in the second quarter to $2.58 billion, the company still managed a net loss of $626 million and racked up $640 million in net interest expenses. Total capital expenditures during this period were an astonishing $9.4 billion, with the full-year forecast sitting at $35 billion-$39 billion.
Nebius’s growth is equally impressive: its revenue skyrocketed 454% year over year to $582.3 million in Q2, with adjusted EBITDA reaching a respectable $236.2 million. However, the company’s capital expenditures came in at around $5.7 billion during this period, and it has since priced an upsized $5.0 billion convertible-note offering on top of existing convertibles.
While these companies’ rapid growth and financing activity may seem like a testament to their potential for profitability, Weisberger cautions that there is reason to be cautious about how quickly they can scale without sacrificing shareholder returns. The high costs associated with buying GPUs, building data centers, and servicing debt could easily erode any profit margins.
Some argue that demand for AI cloud services is real and substantial, which could help offset fixed infrastructure costs over time. Both CoreWeave and Nebius have significant revenue backlogs and customer commitments. However, this perspective overlooks the fact that these companies are still incurring massive losses to achieve their current growth rates.
The involvement of hedge funds in both CRWV and NBIS is another aspect worth considering: as of Q2 2026, a total of 70 hedge funds held CRWV, with some notable investors increasing their stakes significantly. Nebius saw an even larger increase in hedge fund ownership during this period, from 61 to 85.
This investment frenzy raises questions about what exactly investors are betting on – is it the companies’ potential for growth and profitability, or the promise of a future market that will somehow magically correct itself? The answer lies not just with these companies but also within the broader tech industry’s priorities. Weisberger’s warning highlights the dangers of chasing high-growth businesses without fully considering their financial sustainability.
The AI cloud boom is often portrayed as an inevitable consequence of technological progress, driven by a fundamental shift in computing needs and capacities. However, this narrative overlooks the complex dynamics at play in the tech industry today – including issues of profitability, market saturation, and regulatory oversight. As investors continue to pour money into these companies, it’s essential to remember that the future is not yet written.
The current trajectory of AI cloud investments risks creating a financial bubble that could have far-reaching consequences for both the tech industry and the broader economy. It remains to be seen whether CoreWeave, Nebius, or other neocloud companies can find a way to balance their growth ambitions with financial realities. As investors and industry stakeholders continue to grapple with these challenges, one thing is certain: the future of AI cloud computing will not be defined solely by its potential for growth or technological advancements. The sustainability of business models, market demand, and regulatory frameworks will all play critical roles in shaping the trajectory of this industry – and it’s time to take a harder look at what lies ahead.
Reader Views
- TLThe Lens Desk · editorial
While Noah Weisberger's warning about CoreWeave and Nebius's debt-ridden business models is well-taken, one crucial aspect often overlooked in discussions about AI cloud companies' financial sustainability is the elephant in the room: regulatory risk. As governments worldwide begin to scrutinize these entities for their environmental impact, data security practices, and potential misuse of AI capabilities, significant compliance costs could further erode profit margins, rendering even the most optimistic growth projections precarious at best.
- ANAria N. · street photographer
The AI cloud hype train is finally getting derailed. It's been obvious for months that these neocloud companies are living on borrowed money, with razor-thin profit margins and unsustainable debt loads. But what's often overlooked in the rush to judge these companies' financials is the elephant in the room: the sheer environmental impact of building and powering their massive data centers. With electricity-hungry GPU farms and cooling systems gobbling up resources, the true cost of these AI operations far exceeds the accounting ledgers. Time for investors to think about more than just quarterly returns.
- TSTomás S. · wedding photographer
The cloud-computing hype is finally hitting a speed bump. Noah Weisberger's warning should be taken seriously: these AI startups are drowning in debt, and their razor-thin profit margins can't sustain them for long. But what's often overlooked is the impact on smaller businesses that rely on these services – they'll be left holding the bag if these giants go belly up. Will investors be forced to re-evaluate their priorities or will they keep chasing growth without regard for sustainability?