South Korea's 'CoreWeave' IPO Disaster was Poor Timing-What it Means for AI Sentiment

Dow Jones
2小時前

By by Jack Denton

Uh oh. While Monday looked like it may be the start of a recovery in AI stocks after a brutal two weeks of selling, Tuesday has brought back pressures to beaten-down cloud and data center names.

Getting the worst of it is Elice, a South Korean data center and cloud computing specialist. Shares in the company -- which, in strikingly bad timing, priced its initial public offering (IPO) just before the chips and AI selloff began on October 7--fell 32% in their debut in Seoul.

"[Monday's] tech recovery on Wall Street didn't carry over into Asian markets with AI-related names in the region facing renewed pressure on their share prices," said Russ Mould, investment director at broker AJ Bell. "Elice lost a third of its value on its first day of trading with concerns about the sustainability of AI spend ramping up."

It's not just a matter of valuation and timing of capital markets. Elice is falling afoul of sentiment on companies focused on data centers and other AI infrastructure amid worries about the mounting debt fueling the AI build-out.

At the heart of market fears has been CoreWeave stock, which has shed almost a third of its value in recent weeks as the company has been the focus of debt scrutiny. The fact that Elice is perhaps the closest company South Korea has to CoreWeave can't have helped its IPO, even though Elice doesn't suffer from the same balance-sheet pressures as CoreWeave.

Elice itself notched impressive, 200% annualised revenue growth in the first half of this year and was profitable by some metrics. That wasn't enough.

"Nevertheless, its shares fell as much as 32% below the offer price on their first day of trading, demonstrating that rapid growth and improving profitability may not be enough to offset concerns over valuation and future capital requirements," said a team of market analysts at broker Bitunix. "Markets are raising the bar for investment returns."

While much of the chip stock space is turning back into the red on Tuesday, with the likes of Nvidia and Micron falling in premarket trading, names like Elice are bearing the brunt of selling.

Elice's disastrous IPO is likely only further pushing investors to scrutinize data center and cloud computing -- including "neocloud" -- stocks.

CoreWeave was down more than 5% in the premarket with Nebius Group tumbling 4%. IREN, another "neocloud," lost 3.7% and Hut 8 slipped near 3%.

Little has changed fundamentally for these stocks over the last day other than Elice's IPO raising major warning bells. For investors wondering whether the market is ready to exit sentiment-driven selling over AI debt and cloud or data center concerns, Elice's IPO gives a resounding answer: not just yet.

 

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