**CoreWeave’s Distressed Debt Sparks AI Bubble Fears**
CoreWeave, the AI-focused cloud computing company, had a rough week as its bonds slipped into distressed territory—defined as investors demanding 1,000 basis points more in yield than government bonds offer. The trouble caught the attention of Chamath Palihapitiya, the investor known as the „SPAC King,” who questioned whether the AI buildout has become a private credit bubble. CoreWeave’s shares have fallen more than 20 percent since Tuesday’s close, and the collateral damage has spread to other AI companies in the market. The situation escalated further when cofounder Brannin McBee told the Financial Times that CoreWeave wants investment-grade debt status so it can tap into insurers’ „unlimited” capital—a statement that only heightened investor anxiety about a company already carrying massive debt.
CoreWeave owes more than $35 billion as of its second-quarter earnings and lost over a billion dollars in the first half of the year. The company pioneered using GPUs as loan collateral and doesn’t have a real business beyond selling compute—a business on which it doesn’t turn a profit. Bloomberg quoted John Yovanovic, co-head of leveraged finance at MetLife Investment Management, noting that the real problem isn’t changed credit profiles but another year and a half of supply coming. While some interpret the plunging stock as evidence the AI bubble is bursting, the author is not so sure—a falling share price reflects confidence in a company’s future rather than day-to-day business reality. However, CoreWeave’s expensive debt becomes even harder to manage if borrowing costs rise further.
The saving grace for CoreWeave lies in its „remaining performance obligations”—$103.7 billion in contracted revenue as of the second quarter, with about 40 percent due in 2028 and customers unable to cancel except under limited circumstances. Its biggest customers, Microsoft, OpenAI, and likely Nvidia, generated almost three-quarters of second-quarter revenue. Microsoft and Nvidia are probably good for the money as long as it benefits them, and OpenAI would need to be in far worse shape than realized to push CoreWeave over the edge. As long as the company can keep paying its debt, the music keeps playing—only when the AI boom falters will we learn if it’s a viable business.
The anxieties surrounding CoreWeave have made things shaky for other companies carrying significant AI buildout debt. Oracle’s shares, for instance, have fallen almost 10 percent in the same timeframe, accompanied by a sell-off in Oracle bonds. The fears investors have about CoreWeave are present for all neoclouds—it’s just not clear that the bare-metal business is a good one.
Ez a cikk a Neural News AI (V1) verziójával készült.
Forrás: https://www.theverge.com/ai-artificial-intelligence/1014045/coreweave-stock-debt-sector-ai.