AI "New Cloud" rebounds sharply after overselling, quickly cooling down! CoreWeave briefly switched from gains to losses, IREN's gains slashed by half

After the fierce sell-off in the previous trading day, AI computing infrastructure stocks experienced a strong rebound intraday on Friday, but the gains significantly cooled off during the session.

CoreWeave turned from an early rise of 9.3% to a decline, IREN’s gains narrowed from 24.6% at the opening to around 12%, and Nebius Group retreated from an intraday high of 13.7% to just about 2.4%. As of press time, CoreWeave was up 4.4% on Friday.

This round of rebound was initially boosted by IREN’s latest financial report. The company's AI Cloud business revenue surged, with quarterly revenue surpassing market expectations, sending a positive signal to the recently battered Neocloud sector.

However, the financial report simultaneously revealed issues such as project delivery delays for data centers and high capital expenditures, so concerns about industry expansion costs and the ability to realize profits have not dissipated.

On Thursday, AI infrastructure stocks experienced a sharp sell-off. The results of the US midterm elections triggered concerns in the market over stricter regulation on data center construction, combined with Microsoft tightening scrutiny on specific Neocloud provider projects. CoreWeave, Nebius, and IREN fell by around 10%, 15%, and 17% respectively.

Although Friday’s rebound indicated some funds were starting to replenish positions, Microsoft continued to be reported during US midday trading as gradually shutting down some of the computing resources previously leased from Oracle, deciding not to renew related contracts. Following the news, Oracle's share price quickly plunged, and the previously rebounding Neocloud concept stocks also gave back gains.

IREN’s Earnings Beat Expectations, Acting as Catalyst for Sector Rebound

IREN’s fiscal year 2027 Q1 results announced after Thursday’s close provided some boost to the sector.

For the quarter ending September 30, IREN achieved revenue of $228 million, surpassing analyst expectations of $221 million. Notably, AI Cloud business revenue reached $200 million, a significant increase from $71 million in the previous quarter. The company’s adjusted EBITDA stood at $66 million.

IREN also disclosed that its backlog orders reached $20.3 billion, reflecting robust AI computing demand providing support for business expansion.

After the earnings release, investors reassessed the growth outlook for Neocloud companies. IREN’s share price rose about 24.6% at the open, with CoreWeave and Nebius rallying in tandem.

However, the strong revenue growth did not fully dispel market doubts over IREN’s execution capabilities.

The company stated that, due to Microsoft requiring network design adjustments and changes in delivery schedules from suppliers, some data center infrastructure deliveries were delayed. IREN had originally planned to achieve an annualized revenue run rate of over $4 billion by the end of the year, but this target has now been postponed to January 2027, or possibly even February.

Meanwhile, IREN expects capital expenditures for the remainder of the fiscal year to be about $1.5 billion. As of the end of September, the company’s capital commitments had reached $1.895 billion, up significantly from $1.381 billion three months prior.

This means the rapid growth of the AI Cloud business still requires substantial capital input, and project delays may push back the realization time for related revenues.

Microsoft Sends Contraction Signals for Two Days, No Longer Renewing Part of Oracle’s Computing Resources

On Thursday, Bloomberg reported that Microsoft is tightening supervision over some data center projects with Nebius, IREN, and Nscale, withdrawing from those it considers higher risk, while internally discussing whether to sign new Neocloud partnership agreements.

On Friday during US midday trading, Bloomberg, citing sources, again reported that over recent months Microsoft has gradually started shutting down part of the computing resources previously rented from Oracle, and has decided not to renew the relevant contracts.

The report noted that over time, the computing resources leased by Microsoft have increasingly failed to meet its evolving technological needs. The related Oracle servers were equipped with earlier generation Nvidia chips, diminishing their value to Microsoft.

After the news broke, Oracle’s share price quickly turned from gains to losses, having earlier risen 3.8%, before erasing those gains and hitting a new intraday low of $109.21, dropping as much as 5.2% during session. Oracle, for its part, emphasized that the company still sees robust market demand for AI infrastructure, including demand for earlier generation GPUs.

This news also quickly spread to AI computing rental concept stocks. CoreWeave, IREN, and Nebius all saw significant pullbacks after their strong early-session rebounds.

Related reports further intensified market concerns over the business models of third-party computing power suppliers.

For companies such as CoreWeave, Nebius, and IREN, business expansion is highly dependent on data center construction, GPU procurement, and external financing. They need to invest large amounts of capital before generating revenue from projects; thus, power access delays, equipment delivery postponements, or clients adjusting requirements could impact revenue recognition and cash flow cycles.

The financing environment also adds pressure. Especially for CoreWeave, whose highly leveraged expansion model has drawn attention from credit markets. With uncertainty lingering over the investment return cycle for AI infrastructure, investor tolerance for valuations of capital-intensive enterprises is decreasing.

Democrat Victory Raises Policy Concerns, Market Reevaluates AI Infrastructure Investment Returns

In addition to corporate operating issues, changes in the policy environment are also an important background to the recent volatility in the sector.

Following the US Democratic Party’s major victory in the midterm elections, the market began to worry that data center construction could face stricter regulatory scrutiny, particularly regarding policy developments in key data center markets such as Texas.

According to analysts at UBS, as cited by Reuters, roughly 30% of the expected additional data center capacity in the US by 2028 could face construction suspension risks.

Against this backdrop, Friday morning’s rebound was more driven by earnings beats, the overall tech stock recovery, and position adjustments after the previous day’s sharp declines. Microsoft’s latest disclosures regarding computing resource lease adjustments once again shifted market focus back to third-party computing power suppliers’ client demand, technological iteration, and capital return concerns.

For CoreWeave, IREN, and Nebius, the growing demand for AI computing power continues to provide long-term business opportunities. However, whether major cloud service providers can continue to expand external procurement, and whether suppliers can deliver computing resources that meet technical requirements on schedule, have become critical variables impacting the industry’s valuation.