• Treasury Secretary Scott Bessent isn't rattled by the neocloud debt debate that has spooked investors.
• He said AI-related debt isn't "problematic at all" and just a small part of the AI ecosystem.
• Neocloud stocks have slumped amid concerns over mounting debt and uncertain AI investment returns.

Treasury Secretary Scott Bessent weighed in on the neocloud debt debate that recently rattled the AI trade, and he doesn't seem too concerned.

In a CNBC interview Wednesday, Bessent was asked about yields on some AI-related debt climbing into the double digits. The secretary replied, "We monitor all of this."

"I don't think it's problematic at all, because we're seeing that that's the neoclouds are a small component of the overall ecosystem," Bessent added.

He said financing was still getting done, as were deals, and pointed to companies like Meta choosing to finance with equity.

The neocloud industry, which includes players such as CoreWeave and Nebius, provides cloud computing services to AI customers. It's been one of the most talked-about topics in AI over the past week.

The companies have signed multibillion-dollar deals with hyperscalers. Nebius, for example, signed a deal worth over $17 billion with Microsoft last September. In March, it announced a five-year contract with Meta that could be valued at up to $27 billion.

But the industry has come under pressure over the past few weeks, as investors fret about mounting debt levels, rising borrowing costs, and whether AI spending will produce sufficient returns. CoreWeave shares fell by nearly 40% in October, but have recovered slightly from its October 23 low. The Roundhill Neocloud ETF, which invests in major neocloud players such as CoreWeave, Nebius, and IREN, has fallen 24% over the past month.

Elon Musk added to those concerns in an X post on Sunday. He wrote that many neoclouds will face "guppy-level death and consolidation," and that debt markets are hesitating to fund companies that rely almost entirely on AI data centers for revenue. He added that SpaceX would not be acquiring any neocloud companies.

But Nvidia CEO Jensen Huang, whose company has backed several major neocloud providers, offered a more optimistic assessment last week. Earlier this month, he told CNBC that demand for them is "off the charts" and that they have "extraordinary" capabilities.

• Infrastructure startup Hyperbolic raised a $30 million round led by Intel CEO Lip-Bu Tan's VC firm.
• The startup connects companies with neoclouds and makes their AI chips easier to use.
• Hyperbolic also wants to let customers resell unused computing power.

Intel CEO Lip-Bu Tan is backing an infrastructure startup that has raised $30 million to help companies rent compute across hundreds of different AI cloud providers.

Hyperbolic, an AI chip marketplace and software startup, has raised $50 million to date.

Walden Catalyst, the venture capital firm founded by Tan and former Samsung president Young Sohn, led the Series A-1 funding round. Dell Technologies Capital, General Catalyst, Vista Equity Partners, and Cambium Capital also participated.

As companies scramble for computing power, one challenge is that AI cloud providers, or neoclouds, use a mix of different chips, networking, and software. Hyperbolic helps customers find compute resources from different providers and creates software that makes it easier to use them all, rather than dealing with each one separately.

"It's been a really fragmented market that makes the customer experience really painful," said 31-year-old founder and CEO Jasper Zhang.

Hyperbolic also wants to let customers resell compute that they're paying for but no longer need.

The four-year-old startup works closely with about 30 neoclouds, including WhiteFiber and Vector Core Compute. It says it has roughly $200 million worth of compute connected to its software annually.

Hyperbolic previously raised a $12 million Series A round in 2024, led by Variant and Polychain Capital, following a $7 million seed round earlier that year. The company expects to have 50 employees by the end of the year and will use its funding to expand software tools for managing AI chips across different neoclouds.

Zhang said the company is aiming for $150 million in annual recurring revenue by the end of the year and is already breaking even. More than 250,000 developers, including teams at Modal, Higgsfield, and Daytona, use Hyperbolic.

Before founding the company, Zhang worked as a quantitative researcher at Citadel Securities. As Wall Street explores ways to financialize AI chips, he said his startup's plans to let companies resell unused compute could help pave the way for a futures market.

Here's a look at the pitch deck Hyperbolic used to raise its $30 million Series A-1. Slides have been redacted so that the deck can be shared publicly.

• Shares in neocloud companies are falling over concerns about their levels of debt.
• CoreWeave and Nebius, two major public neoclouds, have seen their stocks drop sharply in recent weeks.
• On Sunday, Elon Musk questioned the sector, saying that "some will make it through, but not many."

Neocloud companies are sliding even lower.

Shares dropped further on Monday after Elon Musk warned that many of them face "guppy-level death."

CoreWeave and Nebius have both fallen more than 30% over the past month, largely due to growing concerns about the debt they've taken on to build more data centers.

Soon after Monday's open, shares in both companies were down a further 4%, while Iren, another publicly traded neocloud, fell 2%.

The declines follow a string of X posts from Musk on Sunday evening questioning the neocloud business model.

"As of the past few weeks, debt markets have almost entirely shut off access to money for any company that doesn't have substantial revenue independent of AI data centers," he said.

"That means the 200+ neoclouds are going to see guppy-level death and consolidation," he added. "Some will make it through, but not many."

Musk said that while SpaceX has closed $40 billion in debt to buy GPUs, his company makes money through Starlink and rocket launches.

Meanwhile, investors are worried that a slowing AI boom could leave debt-heavy neoclouds struggling to service their loans.

After one X user posted arguing that Musk was trying to drive down the share prices of neocloud companies to acquire them, Musk replied: "SpaceX is not buying any neoclouds. Pointless."

Nvidia CEO Jensen Huang remains bullish about the sector. "The demand for the neoclouds is off the charts," he told CNBC last Thursday.

Nvidia holds significant stakes in CoreWeave, Nebius, and other cloud-computing companies.

A CoreWeave spokesperson said: "The AI cloud market is not a monolith," and that lenders distinguish between speculative capacity and businesses with contracted revenue and a record of delivery.

They added that the company is "already a market leader operating at scale" with expertise, which it sees as key for opportunities to finance further growth.

A recent Bernstein Research report analyzed thousands of planned US data centers and estimated that only about 35% of the announced capacity will be built.

"Press releases are cheap … concrete is not," Bernstein analysts wrote in a research note.