Nebius Group N.V. (NBIS) stock took a beating Wednesday after a Bloomberg report revealed that Meta Platforms Inc. (META) is exploring a cloud infrastructure business that would sell access to raw computing capacity. The news sent shivers through the AI cloud market, as investors worried about a new wave of competition from one of the biggest tech companies on the planet.

If Meta moves forward with the plan, it would go head-to-head with established cloud giants like Amazon Web Services, Microsoft Azure, and Google Cloud. That's a crowded field already, but Meta's deep pockets and existing AI infrastructure make it a credible threat.

Meta didn't immediately respond to requests for comment, but the market didn't wait for clarification. The report triggered a broad sell-off across so-called "neocloud" companies—specialized AI cloud providers that have been riding the AI boom. Investors quickly reassessed the competitive landscape, and the picture didn't look pretty for the little guys.

The selling wasn't limited to Nebius. CoreWeave Inc. (CRWV) dropped over 13%, and IREN Limited (IREN) fell about 7% on Wednesday. The message was clear: if another hyperscaler enters the AI cloud market, the independent players could face serious pricing pressure and margin erosion.

For Nebius, the news hits especially close to home. The company has a multi-year capacity agreement with Meta valued at up to $27 billion. That's a huge chunk of business, and the idea that Meta could eventually compete with one of its own customers is a nightmare scenario. Investors are worried that Meta's cloud ambitions could undermine Nebius's biggest revenue stream.

The report also revived broader concerns about the long-term moat of independent GPU cloud providers. Cash-rich hyperscalers like Meta have the resources to build massive AI computing clusters and sell excess capacity at competitive prices. That could squeeze smaller operators and make it harder for them to differentiate.

Nebius shares had been on a strong rally before this, which made them more vulnerable to a sharp reversal. The stock fell 16.13% to $231.62 at the time of publication, according to market data. CoreWeave dropped 13.21% to $86.39, and IREN slipped 6.67% to $42.68.

It's worth noting that Meta's reported plans are still in the early stages. But in a market where AI computing demand is growing fast, the prospect of another hyperscaler entering the fray was enough to spook investors and trigger a rotation out of AI cloud stocks. For now, the neocloud sector is feeling the heat.