After a sharp drop of 32%, it rose and stopped “continuing”. Can Elice tear off the “Korean version of CoreWeave” label and get out of trouble?

The Zhitong Finance App noticed that South Korean AI computing power supplier Elice Inc.'s stock price surged on Wednesday, recovering most of its losses after plummeting 32% on the first day of listing, as a series of optimistic US tech stock reports boosted market sentiment.

The stock of the new cloud manufacturer hit a 30% rise and fall in the Seoul small-cap Kosdaq (Kosdaq) index, and was reported at 79,900 won, but it is still lower than its IPO price of 90,500 won. Korea's benchmark, the Korea Composite Stock Price Index (Kospi), rose 4.8% at most, and the KODAQ index rose 2.8%.

Until this week, Elice was barely known outside of Korea, and the company tried to capture investors' enthusiasm for AI through an IPO. Its record first-day decline indicates that investors are increasingly suspicious of new cloud vendors, a rapidly growing segment of the AI industry. Wednesday's strong rebound also highlights that market sentiment remains volatile, as strong industry earnings continue to validate growth prospects.

Xu Zaihuan, an analyst at Eugene Investment Securities, said that Elice's “valuation is not cheap, but such a sharp drop in stock prices is a bit excessive.” “This is because there is a negative market perception that the company is like a 'Korean version of CoreWeave'. This shows that the market has huge doubts about borrowed AI investments.”

Korean IPO debut disappoints investors

New cloud vendors are a sector that has sprung up in the past few years to provide massive data center computing power for artificial intelligence. In particular, they have become the focus of investors' concerns about the sustainability of huge spending on AI infrastructure. The stock price of CoreWeave (CRWV.US), the world's most well-known new cloud vendor, has plummeted 20% in the past week, and its bonds have also fallen to difficult levels due to concerns about huge debt.

Elice CEO Kim Jae-won said in an interview on Wednesday, “Compared with last year, our revenue has basically doubled. This is the minimum guideline.” “I'm not worried about the fluctuations in the first week.”

The rebound in South Korea and other Asian markets on Wednesday was largely due to overnight US quarterly earnings that exceeded expectations. After announcing better-than-expected initial quarterly results, post-market transactions surged, and SpaceX's performance also exceeded expectations.

The Korea Exchange suspended Kospi programmatic buy orders for a while after Kospi 200 futures rose more than 5%. Citigroup strategists warned in a report that crowded short positions on Kospi 200 futures are increasing risk, and once market sentiment suddenly improves, bearish investors may quickly make up for their positions.

Elice's IPO was highly anticipated in Korea, and the distribution to retail investors was partially oversubscribed by about 400 times. However, according to data compiled by Bloomberg, for Korean IPOs with a capital raised of 100 million US dollars or more, the stock's sharp fall on Tuesday was the biggest first-day decline in listing history.

In the interview, Kim Jae-won tried to differentiate Elice from other AI cloud service providers. According to the company, it can quickly catch the surge in demand by deploying pre-installed factory facilities in less than three months.

At a time when investors are concerned about rising AI industry debt, Zian Asset Management CEO Kim Do-jun pointed out that Elice raised capital through equity financing rather than debt.

He said that ELICE's financial structure is “very different” from CoreWeave.