SYDNEY—Nvidia-backed cloud-computing company Firmus Grid scrapped plans for Australia’s largest initial public offering in almost 30 years, a new sign that investors are growing leery of lofty valuations for companies exposed to artificial-intelligence demand.
The retreat comes about a month ahead of Anthropic’s planned blockbuster IPO as investors take a more critical look at companies seeking to ride the AI wave via a public listing. However, investor enthusiasm for AI’s ability to deliver productivity gains has run up against challenges such as the popularity of cheaper AI systems made in China, safety fears after some agents went rogue and a growing backlash to data-center construction across the U.S. and elsewhere. Market participants remain bullish that demand will keep rising but aren’t sure whether the neoclouds can attract enough revenue to support the huge investments needed to build out capacity. To many analysts and investors, the latest valuation looked too high for a company with just two operational data centers and a further five in development across Australia, Malaysia and Indonesia. “It all comes down to valuation: We think that Firmus indeed has a compelling story. With bond yields having surged , many analysts had flagged worries about Firmus’s cost of debt. Investors are still struggling to figure out the value of companies that own chips with an uncertain lifespan. With newer, more powerful chips continually being developed, operators of data centers have to keep updating chips while depreciating the value of older assets. The Firmus bookbuild was jointly led by Bank of America, JPMorgan, Morgan Stanley and local broker Morgans.
Firmus, which sells Nvidia-powered computing capacity to large technology companies such as OpenAI and Meta Platforms, pulled plans to raise $5 billion after investors balked at its proposed $30 billion valuation. The AI boom has sent global stock markets soaring this year, with the S&P 500 and Nasdaq both hitting records earlier this month. Firmus had been targeting a market capitalization of 43.7 billion Australian dollars, equivalent to US$30.4 billion. That was up from US$10.5 billion just two months ago, when institutional investors Blackstone and Coatue participated in raising US$2 billion for Firmus. CoreWeave, which operates 51 facilities, has a market capitalization of $37 billion. Its shares fell nearly 8% Thursday on worries over the profitability of AI-related companies. The IPO would have been Australia’s largest since the partial privatization of telecommunications provider Telstra, which raised about US$10 billion in 1997.
Firmus said it would instead pursue further private investment. Firmus and Nasdaq-listed CoreWeave are among a cohort of “neocloud” providers that supply computing power to AI firms. It just doesn’t have a compelling valuation,” said John Pearce, chief investment officer at Australian superannuation fund Unisuper. Unisuper had chosen not to buy Firmus stock in the IPO, Pearce said. “In a higher-yield environment, investors are clearly demanding greater compensation for risk, including in equities, which places a cap on lofty valuations,” said My Bui, an economist at Australian wealth manager AMP.
Nvidia, the world’s most valuable company, holds a direct equity stake in Firmus, and it is also a customer and hardware supplier to the Australian firm. Many analysts still lean bullish on AI infrastructure, pointing to the hundreds of billions of dollars in spending planned globally. “The demand for compute still far outstrips supply. Write to Stuart Condie at [email protected]
As long as the AI data center build-out continues, neoclouds should keep filling the gap the hyperscalers can’t build fast enough to cover,” said Toby Hearst, associate investment strategist at Yardeni Research.
