(Source: Viktor Cap/Alamy Stock Photo)

The AI bubble hasn't burst – but it certainly looks like it might be ready to deflate. South Korean data center firm Elice is the latest to feel the chill winds of investor caution, dropping 32% on its first day of trading before closing slightly higher.

The company, which tripled its revenue in the first six months of the year, raised 201 billion Korean won (US$150 million) in its debut.

Elice started as an education platform 11 years ago and has since expanded into cloud services, GPU data centers and AI services. It has earmarked its IPO proceeds to fund data centers in South Korea, as well as a possible expansion to the US, Japan and Singapore.

But the company appears to be a victim of rising wariness of the AI trade as well as a wider Korean selloff, with South Korea's KOSPI index sliding 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, propelled by soaring AI memory demand, but has since contracted by two-fifths – a sign perhaps that blockbuster memory profits have peaked.

Multiple headwinds

While there's no sign of Asian data center stocks being marked down, we are seeing a retreat from new listings.

In the past two weeks, Australian company Firmus pulled its $5 billion IPO because of tepid investor interest, and Philippines telco PLDT delayed its data center REIT IPO until next year, while AirTrunk, another Australian player, has also pushed back its $1.5 billion Singapore REIT.

It's a sign the AI boom is running into multiple headwinds. Not only are institutions showing a weaker IPO appetite, but their concerns over the sector’s mountain of debt are rising, exacerbated by higher interest rates and the unclear returns from the epic capex binge.

Meanwhile trade in credit default swaps – a type of derivative 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, was traded every week in September – up from less than $2 billion in July. What happens next is anyone's guess. But while the boom may be tailing off, we can be sure the knock-on impacts in the form of supply chain bottlenecks and higher component costs will be with us for some time.