AI cloud computing companies face ‘guppy-level death’, Elon Musk warns, as funding dries up – business live

Key events19m agoIntroduction: Musk says AI data centre funding is drying upBloomberg, intriguingly, are questioning Elon Musk’s claim that SpaceX has closed a $40bn debt deal to fund more chip purchases.They’ve heard that talks over the pricing of this deal are still ongoing, and report: double quotation markAs of late Sunday in New York, those conversations remained ongoing and the deal hadn’t priced, people with knowledge of the discussions said. The parties are still working on finalizing the debt package in the coming days, the people said. Introduction: Musk says AI data centre funding is drying upGood morning, and welcome to our rolling coverage of business, the financial markets and the world economy.The flow of funding which has helped the AI industry to grow rapidly could be running dry, at least for some firms in the cloud computing world, Elon Musk has warned.The world’s richest person declared last night that at least 200 ‘neoclouds’ – companies which provide specialized cloud infrastructure to run AI workloads – could die or consolidate because they will struggle to access capital.Musk made the claim while also declaring that his SpaceX business has closed a $40bn debt deal to pay for the chips it needs for its artificial intelligence work.He posted on X that firms who rely on revenue streams from AI data centers are being cold-shouldered by lenders, saying: double quotation markAs 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. SpaceX closed $40B of debt for GPUs, but we’re investment grade and have Starlink & launch revenue. That means the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many. [Musk is referring to the guppy fish, the colourful freshwater aquarium fish notorious for suddenly dying in the aquarium, especially if there is a change in its environment.]Neoclouds are specialist cloud providers that rent out clusters of high-speed Nvidia chips to firms looking to conduct AI training and inference.They include CoreWeave, the US firm whose share price has fallen 60% in the last year as investors have questioned whether the huge investment in AI data centres will be rewarded with lucrative cash flows.The cost of insuring CoreWeave’s debt against default has climbed in recent weeks to levels that typically suggest credit distress – Musk’s comments are unlikely ease investors concerns!The agenda 9am: IFO German business climate 11am: CBI distributive trends survey of UK retail