CoreWeave CEO Michael Intrator appears after the company’s initial public offering at the Nasdaq MarketSite in New York on March 28, 2025.
Michael Nagle | Bloomberg | Getty Images
CoreWeave is facing a crisis of confidence on Wall Street that’s playing out in real time among equity and bond investors.
With interest rates spiking and AI buildout concerns mounting, debt-heavy neoclouds like CoreWeave are being viewed by many market participants as the most vulnerable trade in the artificial intelligence space.
“Sentiment is decidedly negative,” Andrew Keches, a credit analyst at Barclays, wrote in a note to clients on Tuesday, referring broadly to corporate debt in tech. Keches highlighted the “speed at which AI vibes are shifting on a day-to-day basis.”
CoreWeave, which went public in March of last year and reached a peak market cap of about $90 billion three months later, is now valued at roughly $34 billion, with its stock down 29% this month. Its unsecured debt, meanwhile, is sporting a yield of about 15%.
CoreWeave’s stock move this month
The spread on CoreWeave’s five-year credit default swaps, which are insurance against default, is up 164% in the past year and 30% in October. It last stood at nearly 1,067 basis points, or 10.67%.
CoreWeave declined to comment.
The story is playing out across the neocloud sector. Shares of Nebius are down 27% this month, while IREN’s stock is down 32%. In Australia, shares of data center operator NextDC plunged 40% on Wednesday after the company slashed its annual earnings forecast. Earlier this month, Australian data center company Firmus scrapped its planned IPO, citing market volatility and conditions.
U.K. neocloud Nscale is now under the microscope as investors wait to see whether the Nvidia-backed company will go through with its IPO. The company filed to go public on the New York Stock Exchange last month.
A representative from Nscale declined to comment.
On hold until midterms
CoreWeave is the biggest of the pack, and is intimately tied to the U.S. AI market. Nvidia is its top institutional investor, with a stake of about 9%, according to FactSet. And more than two-thirds of CoreWeave’s revenue last year came from Microsoft.
That’s put a spotlight on CoreWeave’s financials and its ability to remain viable. The company has about $20.7 billion in debt coming due through 2030 and another $14.9 billion thereafter, with the prospects of higher interest rates on future financing.
Sources on credit desks told CNBC that the high-yield debt market is effectively on hold until after the midterm elections in two weeks given ongoing concerns about the political pushback that data centers are facing. One source, who asked not to be named because of the sensitivity of the matter, said fixed income investors “want permitting and regulatory requirements to be substantially resolved” before they commit financing.
“Given recent turbulence, pausing makes sense,” Seth Meyer, global head of client portfolio Management at Janus Henderson, said in an interview.
CoreWeave CEO Mike Intrator, who co-founded the company in 2017 initially as a crypto mining venture, sent a memo to employees on Thursday, which CNBC obtained, to try and tamp down concern. Intrator stressed that the company maintains a range of funding options.
“Our financing model combines infrastructure-backed borrowing, corporate debt, equity, and customer prepayments,” Intrator wrote. He added that the company has “additional flexibility to raise equity over time as market conditions and our capital needs warrant.”
CoreWeave had $5.5 billion of cash and equivalents at the end of the second quarter. The company is expected to report third-quarter results next month. Analysts expect negative free cash flow in the period to swell to $10.1 billion, the highest since the company started reporting quarterly financials, according to FactSet.
One issue being debated heading into the report is how much more capital CoreWeave needs to raise. Rob Oliver, a software analyst at Baird, is estimating roughly $30 billion in 2027.
“Earnings may address financing measures to shore up confidence,” Oliver said in an interview. “But they wouldn’t need that capital until the first quarter.”
Another question is whether Nvidia step in if necessary?
Nvidia, which supplies the graphics processing units that CoreWeave rents out, invested $2 billion in January for a 10% stake. The purchase price was $87.20 a share. The stock is now trading at $61.82 even after jumping 6% the day of the announcement.
While Nvidia CEO Jensen Huang said last week that CoreWeave doesn’t need a backstop, some investors say the chip giant’s further participation may be necessary if credit conditions continue to worsen.
Nvidia didn’t immediately respond to a request for comment.
Analysts at Goldman Sachs, JPMorgan Chase and Barclays have put out bullish notes on the company this week, highlighting the company’s GPU-backed loans and its solid list of investment grade customers like Microsoft and Meta. Goldman analysts emphasized the company’s strength in the market relative to many of its neocloud competitors.
“Not all neoclouds are created equal,” they wrote, in upgrading their rating to buy from hold. “CoreWeave is likely in the top quartile of neoclouds, if not the top decile, when measured on performance and ability to execute.”
—CNBC’s Michelle Fox and Jordan Novet contributed to this report.
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