CoreWeave shares plunge on debt and credit concerns
Summarised from 2 outlets · 5 reports · Updated 16 Oct, 15:38 · Archive
Shares of neocloud company CoreWeave fell sharply as debt yields and credit risk indicators climbed amid concerns over AI infrastructure spending.
CoreWeave, which rents out computing power for artificial intelligence applications, saw its share price fall 15% on Wednesday as investors soured on the company's debt strategy. The losses continued Thursday, though the stock recovered somewhat to close 5.94% higher after Wednesday's fall. Other neocloud companies Nebius and Iren also fell under pressure.
The sell-off reflected growing concerns about CoreWeave's finances. The company has accumulated more than $50 billion in debt and obligations to finance its data centre build-out. Yields on its bonds climbed to 15.78%, while credit default swap spreads — insurance against the company defaulting on its debt — soared above 1,140 basis points, indicating investors view the debt as increasingly risky.
Traders responded by buying large volumes of options betting the stock would fall further. On Wednesday, nearly 200,000 puts were bought compared to 106,000 calls. One large trade involved 26,000 put options expiring in mid-December. According to Scott Bauer, CEO of Prosper Trading Academy, these were "bubble puts" — bets on a significant price decline rather than complete collapse.
The CoreWeave sell-off has spread anxiety across the artificial intelligence sector. Shares of chip makers Micron Technology and Advanced Micro Devices also fell, reflecting broader concerns that companies borrowing heavily to build data centres and purchase chips may have taken on unsustainable levels of debt.
How it is being reported
- Here's how the CoreWeave sell-off is affecting OpenAI vs. Anthropic valuationsThe spread is widening between AI leaders OpenAI and Anthropic as a sell-off in CoreWeave leads neocloud stocks lower.CNBC · 16 Oct, 14:43
- CoreWeave’s slump spotlights growing burden of debt behind AI boomThe loss-making cloud company has about $50 billion in debt and has become a focus of concerns that the data-center boom is being fueled by credit.The Japan Times · 16 Oct, 05:52
- CoreWeave credit default swaps hit distress levels as investors sour on AI debtSigns of distressed deepened in CoreWeave on Thursday.CNBC · 15 Oct, 17:52
- Traders pile into 'bubble puts' on CoreWeave as neocloud stocks plungeAs a key corner of the artificial intelligence trade takes a beating on Wednesday, traders are betting it could get even worse.CNBC · 14 Oct, 18:10
- CoreWeave shares tumble as bond yields near 15% on concern about AI borrowing bingeShares of CoreWeave sank 15%, while yields in its bonds blew out further.CNBC · 14 Oct, 18:06
In this story: CoreWeave · Nebius · Iren · Nvidia · OpenAI · Anthropic · Chamath Palihapitiya
This summary was written by AI from the headlines and standfirsts above, and states as fact only what at least two outlets report. How we use AI · Report a problem
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