📌 Interest Erosion and Depreciation Sensitivity: Compute Cloud Unit Economics Under Pressure
AI compute cloud providers, represented by CoreWeave and Nebius, whose business model relies on highly leveraged hardware procurement and external leasing, are facing the dual test of deteriorating unit economics and a heavy financial burden.
Investment bank Rothschild Redburn recently downgraded Nebius and CoreWeave to Sell. The core divergence lies in the long-term sustainability of compute unit economics: on one hand, GPU rental pricing in the market has shown a downward trend, while major cloud providers are accelerating self-built compute capacity, siphoning off external demand that originally flowed to third-party compute clouds; on the other hand, high debt financing costs continue to climb, directly compressing the overall return on investment for compute hardware.
Data at the financial statement level further confirms this structural pressure. CoreWeave’s financial reports show that its interest expense has reached 5 times its operating profit, with debt leverage eroding profitability in an extremely evident manner. More crucially, the asset-heavy model makes company valuation exceptionally sensitive to hardware depreciation life assumptions: under a baseline estimate of a 6-year depreciation life, the corresponding fair value per share is only USD 9; only when stretching the GPU useful life assumption to 9 years does the valuation estimate reach USD 146, while its current share price sits near USD 81. For compute hardware with rapid iteration cycles, an overly long useful life assumption inherently conceals immense technological obsolescence risks.
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