Microsoft reported capital expenditures of $45.2 billion for the quarter, which, while a 30% increase year-over-year, fell short of the $50.7 billion expected by analysts. This shortfall raises concerns about the ability of infrastructure partners, particularly neoclouds, to deliver necessary data center capacity as Microsoft invests heavily in AI infrastructure.
Following the report, shares of CoreWeave and Nebius dropped nearly 5%, reflecting investor anxiety over the neocloud sector's stability. The broader market sentiment is further influenced by rising interest rates, which have led to fears that future debt financing will become prohibitively expensive.
Additionally, Alphabet's capex also missed estimates, further dampening investor confidence in the sector. Elon Musk's prediction of a potential collapse of over 200 neocloud companies adds to the uncertainty, as does Gartner's forecast that 80% of these firms may not survive by 2030.
Despite a recent recovery in neocloud stocks, the outlook remains precarious, with analysts at Wolfe Research suggesting a rebound for CoreWeave to the mid-$70s, while it closed at $63.93. The overall infrastructure narrative was somewhat bolstered by Oracle's strong revenue forecast, but the immediate impact of Microsoft's report has overshadowed this positive news