As concerns over AI lending intensify, CoreWeave’s stocks and bonds may experience significant declines this week.
Reuters, October 16 - On Friday, CoreWeave's stocks and bonds faced a sharp decline this week as investors grew increasingly uneasy about the company’s debt financing supporting its artificial intelligence business expansion amid rising borrowing costs.
The company’s stock CRWV.O fell 4.1% in pre-market trading on Friday, after rising 5.9% in the previous session.
Details are as follows:
As of the close of the previous session, the stock had fallen more than 15% this week, heading for its biggest weekly drop in about two months.
This week, AI infrastructure stocks (link) broadly declined as high inflation (link) heightened market concerns over borrowing costs.
“High inflation data triggered a sharp sell-off in CoreWeave because its business model is highly dependent on debt to bet on future data center demand,” said analysts at BCA Research.
“Although other companies in the tech sector are also sensitive to the pace and scale of AI adoption and application, overall, their sensitivity to interest rates is much lower.”
Competitor Nebius Group (NBIS.O) saw its share price drop 1.5% on Friday morning, also facing its worst weekly decline in two months.
CoreWeave is a loss-making cloud computing company (link) with total debt of about $50 billion.
On Thursday, the yield on CoreWeave’s dollar bonds maturing in October 2031 US21873SAG30=TE briefly broke through 16%.
The bond is set to fall for a fifth consecutive week, dropping about 3 cents per dollar face value this week.
According to S&P Global Market Intelligence, the cost of credit default swaps (CDS) on CoreWeave debt surged above 1,000 basis points this week, reaching a record high.
As of the close of the previous session, CoreWeave’s share price had dropped by one-fifth so far this month.
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