Shares in neocloud companies CoreWeave (CRWV), Nebius (NBIS), and IREN Limited (IREN) tumbled on Thursday afternoon. This coincides with President Donald Trump's reaction to a New York order on data centers and a sell-off in AI chip stocks, driven by TSMC's (TSM) weaker margin outlook in its latest Q2 results.

TipRanks Welcomes a New ETF – NYSE:RANK

Explore AMZO for 2X short leverage on AMZN

'New York State Has Made a Terrible Decision'

On Tuesday, New York Governor Kathy Hochul issued a moratorium that imposes a temporary ban on the development of new, large data centers in the state. Hochul pointed to rising utility bills and the massive natural resources required to run these facilities.

Reacting to the move, Trump, in a post published on Truth Social on Wednesday, slammed the move. He noted that "New York State has made a terrible decision." "One of the biggest driving forces in the future for jobs are data centers. They are big, strong, bold, and Money Machines for the State in which they are built," Trump said in the post.

He added, "Governor Kathy Hochul, for political reasons, has terminated all data centers being built, or to be built, in New York State. These companies are now being sought in Alabama, Florida, Texas, Arizona, and many other states."

What Does New York's Order Mean for Neocloud Companies?

Shares in the neocloud companies dropped following the comments. This is even though the move is likely to have a more direct impact on hyperscalers such as Amazon (AMZN), Google (GOOGL), and Meta (META).

Of the three neocloud companies, only CoreWeave is believed to have a data center project in the state. In September 2022, it announced LGA1, a "new ultramodern data center on the Hudson River." However, the new order focuses on new data center projects.

Pressure on AI Chip Stocks Spread to Neoclouds

Meanwhile, the drop in neocloud stocks comes as AI chip stocks, particularly Advanced Micro Devices (AMD) and Intel (INTC), are falling.

Investors are spooked by TSMC's plans to further expand its capital spending in 2026. This comes as the world's largest contract chipmaker also expects its gross margin to decline in the latter half of this year.

It is important to note that CoreWeave, Nebius, and IREN are traded as proxies for the AI trade. This is due to their role in supplying AI cloud capacity to large organizations.

Which Neocloud Stock Is the Best Buy?

All three neocloud stocks mentioned in this article currently carry a Moderate Buy consensus rating from Wall Street, according to TipRanks' Stock Comparison tool.

However, IREN Limited (IREN) currently offers the biggest upside of about 122%. This is based on an average price target of $77.20.