Elice Slides 32% on Debut as AI Data Center IPOs Lose Their Shine

South Korean data center firm Elice dropped 32% on its first day of trading in Seoul, even after raising 201 billion Korean won (US$150 million) in its debut. The stock closed slightly higher than that low, but the message from investors was hard to miss.

Elice did not list a broken company. It tripled its revenue in the first six months of the year. The company started as an education platform 11 years ago and has since expanded into cloud services, GPU data centers and AI services. It earmarked its IPO proceeds to fund new data centers in South Korea, plus a possible expansion into the US, Japan and Singapore.

The debut landed amid two pressures at once: rising wariness of the AI trade and a wider Korean selloff. South Korea's KOSPI index slid a further 3.7% on Tuesday. The index, dominated by memory giants SK Hynix and Samsung Electronics, doubled in the first six months of the year on soaring AI memory demand. It has since contracted by two-fifths — a sign, perhaps, that blockbuster memory profits have peaked.

Who else is pulling deals?

Elice is not an isolated case. Asian data center stocks are not being marked down yet, but new listings are clearly in retreat:

• Firmus (Australia) pulled its $5 billion IPO two weeks ago, citing tepid investor interest.
• PLDT (Philippines) delayed its data center REIT IPO until next year.
• AirTrunk (Australia) pushed back its $1.5 billion Singapore REIT listing.

Taken together, the pulled and postponed deals point to a funding window that has narrowed considerably in a matter of weeks.

What is spooking institutional investors?

Institutions are showing weaker IPO appetite, and their concerns over the sector's mountain of debt are rising. Higher interest rates have exacerbated those worries, alongside unclear returns from the epic capex binge now underway across the AI supply chain.

The derivatives market reflects that anxiety. Trading in credit default swaps — a type of derivative used for hedging loans — has skyrocketed in the past three months, the Financial Times reports. More than $9 billion of these swaps, linked to bonds issued by big AI investors such as Alphabet, Oracle and Nvidia, traded every week in September. That figure stood at less than $2 billion in July.

A fivefold jump in hedging activity against the sector's biggest backers within a single quarter is the kind of number that changes underwriting committees' minds about new listings.

Bubble or deflation?

The AI bubble has not burst, but it increasingly looks ready to deflate. Elice's stumble, the KOSPI's two-fifths contraction from its peak, and the string of shelved IPOs across Australia, the Philippines and Singapore all point in the same direction: private caution arriving before public markdowns.

What happens next remains anyone's guess. But while the boom may be tailing off, its knock-on effects — supply chain bottlenecks and higher component costs — look set to weigh on the telecom and data center buildout for some time. PLDT's delayed REIT, now penciled in for next year, will serve as the next real test of whether investor appetite returns.