Shares of major neocloud companies fell in premarket trading on Monday after Elon Musk warned on X that more than 200 companies in the sector could collapse.

Nebius, CoreWeave and Iren each dropped more than 4% in early premarket trading, adding pressure to a sector already facing investor concerns about debt-fueled expansion and whether the massive AI infrastructure buildout will generate returns.

The losses pared as the opening bell approached — Nebius was roughly flat while CoreWeave and Iren were down around 2%.

Musk wrote Sunday that debt markets have 'almost entirely shut off access to money' for companies without revenue independent of AI data centers, meaning 'the 200+ neoclouds are going to see guppy-level death and consolidation.'

The warning is striking coming from Musk because SpaceX is itself a direct competitor to the neoclouds, which rent out compute capacity — and it landed the same day Musk announced SpaceX had closed $40 billion in debt financing to purchase GPUs for its AI operations.

According to Fox Business, Musk said SpaceX secured the money because of its investment-grade status and revenue from Starlink and rocket launches, unlike debt-heavy neoclouds.

When an X user suggested Musk was driving down share prices to buy the companies, he replied flatly: 'SpaceX is not buying any neoclouds. Pointless.'

The sell-off started earlier this month after the spread on CoreWeave's five-year credit default swaps hit levels generally viewed as signs of distress, per CNBC, with the yields on CoreWeave's bonds also climbing.

According to Reuters, bonds of Nebius maturing in 2034 and CoreWeave bonds expiring in 2033 have hit record lows. Hedge fund founder Alberto Gallo told Reuters: 'There is too much debt.

It's been spent on the assumption of infinite demand and need for AI compute, and it has concentrated credit markets into one risk, paying investors very little.'

Neocloud stocks have taken a hammering over the past month: CNBC reports CoreWeave and Nebius are down more than 30% while Iren has tanked 40%.

According to Reuters, shares of CoreWeave, Nebius and Iren have fallen more than 30% this month alone, and short sellers have raked in at least $6 billion in paper profits.

Gartner said earlier this month that CoreWeave tops the 100-odd neoclouds most exposed to rising leverage and that 80% of such companies could cease independent operations by 2032, Reuters reports.

A Bernstein Research report analyzed thousands of planned US data centers and estimated only about 35% of announced capacity will be built — 'Press releases are cheap … concrete is not,' its analysts wrote, per Business Insider.

The sector is not taking the criticism quietly. Nvidia, an investor in several neoclouds, looked to shore it up at its GTC event in Berlin, with CEO Jensen Huang telling CNBC demand is 'off the charts' — while conceding demand for capital far exceeds its availability.

Nebius chief revenue officer Marc Boroditsky distanced his company from CoreWeave, saying 'we're not carrying the kind of debt that they are,' and said 2027 capacity would sell out if brought online.

Iren co-CEO Daniel Roberts told CNBC customer demand has not changed, with conversations covering multiples of all capacity it can bring online next year.

Chamath Palihapitiya, whose X post Musk was replying to, predicted 2027 will be 'a turbulent year because it will clear out a bunch of wrong/bad bets,' with partially stranded compute sitting in inventory and 'effectively underearning or collecting dust,' per CNBC.

Reuters notes brokerages expect AI spending to shoot past a trillion dollars next year as AI assets face rapid depreciation and markets price in more Fed rate hikes.

CoreWeave, Nebius, Applied Digital and TeraWulf have reported quarterly losses over the past year, and IREN has not turned a profit in three quarters — leaving profitability the open question as financing doors close.