Wall Street analysts bullish on the share price trajectory of new cloud computing leaders like Nebius and CoreWeave argue these AI-focused cloud providers are poised for broader and more durable business opportunities in the AI inference era.

However, Rothschild & Co. Redburn, the independent investment research arm under the Rothschild umbrella, delivered a distinctly cautious and bearish message in its first coverage of these two new cloud heavyweights, stating that credit markets are flashing warning signals.

The research house contends that current earnings performance and valuations for these new cloud companies have been inflated by the cyclical boom, with Nebius in particular having its share price already reflect the most optimistic outcomes from the repricing of compute economics, while CoreWeave carries relatively lower downside risk but still lacks a risk-reward profile that justifies a positive rating.

The common logic underpinning the relatively strong share performance of CoreWeave and Nebius this year is the expansion of AI training and inference demand, coupled with the scarcity of GPU clusters, power supply, and data center capacity that can be delivered in a timely manner, prompting some Wall Street analysts bullish on these new cloud players to raise their expectations for revenue scale and pricing power at both companies.

Nebius in particular has seen its stock climb roughly 167% year-to-date, and on September 17 announced a further increase of approximately 20% in the on-demand rental price for certain GPUs effective October 1, marking the second price hike in three months, while CoreWeave has also indicated it is signing contracts at higher rates.

These developments have reinforced the bullish thesis that compute demand can translate into commercial revenue, with Nebius's latest adjustment targeting certain on-demand services while existing long-term contracts continue under their respective terms.

From the perspective of data center project economics, the Rothschild research report questions how much shareholder return remains from GPU rental income after covering equipment depreciation, operating expenses, and financing costs, noting that CoreWeave reported second-quarter revenue of $2.575 billion alongside net interest expenses of $640 million, highlighting that financing costs have become a significant variable affecting profitability.

The Rothschild team further argues that off-balance-sheet commitments from hyperscale cloud providers have increased their effective economic leverage, and following this logic, if customer expansion budgets or financing conditions tighten, the pace of new orders, project deployments, and cash recovery for new cloud companies could be impacted.

The core investment takeaway for global AI new cloud compute rental players is that this may heighten market scrutiny over valuation, financing capability, and capital returns for these two firms, though this does not itself represent order cancellations or downward guidance revisions, and going forward some investors may shift toward evaluating order growth in conjunction with cash recovery capability while re-comparing the return structures of compute operators, data center landlords, and power resource holders.

Stocks Played On Growth While Credit Priced In Commitments, Rothschild Warned The Credit Market Was Sending A More Important Signal

Rothschild & Co. Redburn stated that earnings and valuations for new cloud companies show cyclical exaggeration but maintains a cautious neutral stance on AI infrastructure overall.

Rothschild & Co Redburn has equity and management ties to the Rothschild family, operating as the equity research and securities services arm of the Rothschild Group, offering research and trade execution to institutional investors, with the group being family-controlled and held by Rothschild family members, senior partners, and other long-term investors, under the overall management of Alexandre de Rothschild.

The firm's stance on Monday toward the two largest new cloud leaders, Nebius and CoreWeave, was more cautious than its view on Bitcoin miners transitioning into AI compute infrastructure construction, assigning sell ratings to both Nebius and CoreWeave, with the core rationale being that credit markets are pricing risks that AI stocks have largely ignored.

In its first coverage of CoreWeave and Nebius, Rothschild issued sell ratings on both, while also initiating coverage on Core Scientific, TeraWulf, Applied Digital, Cipher Mining, Hut 8, and IREN, all of which are accelerating their transitions from Bitcoin mining into AI compute infrastructure resource providers, but received neutral ratings.

Rothschild noted that the equity market narrative around generative AI infrastructure remains firmly bullish but added that the credit market is beginning to price in risks that the equity market is largely overlooking.

Against this backdrop of broad market gains, shares of NBIS rose as much as 1.1% in early trading, with retail sentiment on Stocktwits in bullish territory over the past day, while CRWV shares gained about 1.8%, also seeing bullish sentiment.

The credit market is sending a distinctly different cautionary signal on AI, and Rothschild believes this signal is more important because when off-balance-sheet commitments are included, the actual economic leverage of hyperscale cloud providers is higher, which is the core logic behind why credit market caution warrants collective investor attention.

The firm indicated this could limit the ability of these providers to continue funding the next phase of large-scale AI infrastructure buildout, a warning that is especially relevant for companies transitioning from Bitcoin mining to AI and high-performance computing.

CORZ, WULF, CIFR, HUT, and IREN are all developing data center businesses alongside or in parallel with crypto mining operations, seeking to monetize power resources and data center capacity through AI demand.

Among these companies, HUT shares led gains with a sharp 6% jump in early trading, followed by CIFR which rose 4%, while Stocktwits retail sentiment around HUT remained bearish over the past day and sentiment around CIFR stayed bullish.

Meanwhile, IREN shares climbed 3% in early trading, WULF gained 2.5%, and CORZ rose about 2%, with retail sentiment around IREN and WULF shifting from neutral to bearish over the past day, while sentiment around CORZ moved in the opposite direction.

Rothschild stated that Nebius, which has received funding support from AI chip giant Nvidia, faces the most significant downside risk, saying its share price already reflects the most optimistic scenario in the ongoing repricing of compute economics.

The firm believes CoreWeave's downside risk is smaller than Nebius, but its risk-reward profile remains insufficiently attractive to warrant a sell rating.

Companies directly involved in the new cloud business model face greater valuation concerns, while traditional real estate investment trusts may benefit indirectly from ongoing data center construction, with Rothschild highlighting that traditional REITs deserve particular attention as underappreciated indirect beneficiaries.

Bitcoin prices rose in morning trading, approaching $85,000 before pulling back, with the world's largest cryptocurrency at one point gaining 5.5% over the past 24 hours and trading at approximately $84,800 at the time of writing.

BTC is the most actively traded ticker on Stocktwits, with retail sentiment improving from bearish to neutral over the past day.

New Cloud Players Raise AI Compute Prices Fueling Expectations, But Credit Markets Keep Questioning Returns

The long-term compute procurement commitments from hyperscale cloud providers support order books for new cloud companies but also create payment obligations that customers must fulfill in the future.

If terminal AI commercialization revenue falls short of prior expectations while rental payments, equipment upgrades, and financing expenses continue to materialize, pressure could transmit to new cloud companies like CoreWeave and Nebius through slower new order growth, renewal negotiations, and counterparty credit risk.

This is precisely why Redburn believes credit market signals carry greater weight.

The near-endless expansion of AI inference compute demand can still create business growth, but valuations also need to assess how much cash these increments ultimately retain.

Therefore, competition in the AI inference era for new cloud players will place greater emphasis on order quality, prepayment arrangements, equipment utilization, and capital returns after covering hardware refresh and financing costs.

The credit market referenced by Rothschild's Redburn refers to the market where companies borrow money and investors price default risk, primarily encompassing corporate bonds, bank loans, private credit, data center project financing, and risk hedging tools such as credit default swaps.

Equity investors focus on how much growth AI can deliver, while creditors concentrate on whether future cash flows can cover interest and principal, and observing the credit market hinges on credit spreads, the additional compensation of corporate bond yields over comparable government bonds, along with CDS default protection costs, with rising indicators typically meaning investors demand higher risk compensation.

Redburn under Rothschild believes equities are still actively pricing AI growth while debt capital is beginning to factor in the repayment and financing pressures behind massive construction expenditures.

According to public research report summaries, its core assessment is that after incorporating off-balance-sheet commitments such as leases that have not yet commenced, the actual economic leverage of hyperscale cloud providers is higher, potentially limiting their ability to continue supporting the next round of AI infrastructure expansion.

Recent examples cited by Rothschild show that the $18 billion loan tied to Oracle's Project Jupiter data center is quoted at approximately 89 to 91 cents per dollar of face value, reflecting investor caution over project execution and financing risks, and such credit market constraints could transmit through customer expansion budgets, order fulfillment, and financing conditions to the growth and valuations of CoreWeave and Nebius.

The focus of Rothschild's Redburn on credit markets echoes the latest warning from Michael Burry, known as the Big Short, with reports indicating Burry estimates that Amazon, Meta, Alphabet, Microsoft, and Oracle collectively hold nearly $1.2 trillion in uncommenced lease commitments, over $1.5 trillion in purchase commitments, plus exposures from special purpose entities, guarantees, and contingent support, totaling more than $3 trillion.

Burry explicitly stated he is not alleging fraud, with the core concern being that long-term leases and procurement expenditures are already locked in while equipment economic value, technical requirements, and future demand could change more quickly, leaving companies exposed to mismatches between capital recovery and hardware refresh.

It is worth noting that the $3 trillion figure represents Burry's aggregated estimate of various multi-period commitments and cannot be directly equated with realized losses, and its specific investment implication is primarily that assessing the expansion capacity of AI data center giants requires simultaneous examination of future cash expenditures disclosed in financial statement footnotes.