CoreWeave Debt Stress Mounts: Bond Yield Hits Record as Stock Suffers $44 Billion Wipeout

CoreWeave (NASDAQ:CRWV), the Nvidia (NASDAQ:NVDA)-backed neocloud company, faces significant debt stress as bond yields keep climbing amid ongoing fears of an artificial intelligence (AI) bubble. Its stock has also slipped to its lowest level since May last year. 

CoreWeave Bond Yields Are Rising

Investors are selling CoreWeave’s bonds as its debt continues to rise and jitters over the artificial intelligence industry intensify. The yield on its $2.75 billion bond maturing in 2031 rose to a record 15.76%, topping the previous high of 15.74% reached on October 14.

At the same time, the spread on its five-year credit default swaps (CDS) has risen 171% this year and 36% in the past month, reaching 1,115 basis points. A CDS is a form of insurance against default, so a rising spread signals that investors are paying more for protection.

The crisis has also spread to its stock, which continued its recent downward trend. It dropped to $56.50 on Thursday, down by 70% from its all-time high. Its market capitalization has dropped by $44 billion since May and $57 billion from its all-time high. 

The retreat has also hit other companies in the neocloud industry, with top companies like Nebius (NASDAQ:NBIS), IREN (NASDAQ:IREN), and RUM Group (NASDAQ:RUM) being in the red.

Neocloud Industry is Facing Major Risks

CoreWeave and its competitors are facing substantial risks. Earlier this month, Firmus, another Nvidia-backed company, pulled its IPO in Australia as investors pushed back against its $30 billion valuation. Nscale, a similar company, is also facing investor pushback ahead of its IPO.

Gartner (NYSE:IT), a research firm, has warned that neocloud companies will be forced to announce large impairments in late 2030. The report cited the wide gap between ongoing AI spending and expected future revenue.

Indeed, CoreWeave has reported substantial depreciation and amortization costs this year. These rose to $2.5 billion in the first six months, compared with $4.6 billion in revenue. 

These concerns likely explain why CoreWeave’s insiders have continued selling shares. Benzinga data shows that top insiders have sold shares worth over $765 million in the last 90 days

Still, CoreWeave has some potential bullish catalysts. For one, demand for its services continues to rise, with its revenue backlog now over $104 billion. This backlog is from companies like Microsoft, OpenAI, Anthropic, and Jane Street.

Further, Jensen Huang has maintained the view that neocloud companies are seeing strong demand. In a statement, he said that the demand was "off the charts", with the only limitation being working capital. 

Image: Shutterstock