CoreWeave shares have fallen 29% this month, leaving the company valued at roughly $34 billion as investors question available financing options. CoreWeave went public in March of last year and reached a peak market capitalization of about $90 billion three months later. CoreWeave's unsecured debt now yields about 15%. The spread on CoreWeave's five-year credit default swaps, which protect against default, has increased 164% over the past year. The spread rose 30% in October and most recently approached 1,067 basis points, or 10.67%.
Many market participants view heavily indebted neocloud companies such as CoreWeave as the most vulnerable AI investments amid rising interest rates and concerns about AI infrastructure spending. Barclays credit analyst Andrew Keches described sentiment toward technology corporate debt as decidedly negative in a Tuesday client note and highlighted rapidly changing attitudes toward AI. CoreWeave declined to comment.
Nebius shares have fallen 27% this month. IREN shares have declined 32% this month. Australia's data center operator NextDC lost 40% on Wednesday after cutting the company's annual earnings forecast. Australia's data center company Firmus canceled a planned IPO earlier this month, citing volatility and market conditions. Investors are watching whether Nvidia-backed U.K. neocloud Nscale proceeds with an IPO after filing last month to list on the New York Stock Exchange. An Nscale representative declined to comment.
CoreWeave is the largest company in the neocloud group and has close connections to the U.S. AI market. FactSet identifies Nvidia as CoreWeave's largest institutional investor, holding about 9%. Microsoft accounted for more than two-thirds of CoreWeave's revenue last year. CoreWeave has about $20.7 billion in debt maturing through 2030. Another $14.9 billion matures afterward, and future financing could carry higher interest rates.
Credit desk sources said the high-yield debt market is effectively paused until after the midterm elections in two weeks because of concerns about political opposition to data centers. One source, speaking anonymously because of the matter's sensitivity, said fixed-income investors want permitting and regulatory requirements largely resolved before providing financing. Seth Meyer, global head of client portfolio management at Janus Henderson, said recent market turbulence justified a pause.
CoreWeave CEO Mike Intrator told employees in a Thursday memo that financing options include infrastructure-backed borrowing, corporate debt, equity and customer prepayments. Intrator said CoreWeave also has flexibility to raise equity over time depending on market conditions and capital requirements. CoreWeave held $5.5 billion in cash and equivalents at the second quarter's close. CoreWeave is expected to release third-quarter results next month. FactSet data show analysts expect third-quarter negative free cash flow to reach $10.1 billion, the largest shortfall since CoreWeave began publishing quarterly financial results. Baird software analyst Rob Oliver estimates CoreWeave needs to raise roughly $30 billion in 2027. Oliver said the earnings announcement may address financing measures intended to rebuild confidence. Oliver said CoreWeave would not need that capital until the first quarter.
Nvidia supplies the graphics processing units that CoreWeave rents to customers. Nvidia invested $2 billion in January for a 10% stake at $87.20 per share. CoreWeave shares rose 6% on the announcement day. CoreWeave shares now trade at $61.82. Nvidia CEO Jensen Huang said last week that CoreWeave does not need a financial backstop. However, some investors say further Nvidia support may become necessary if credit conditions deteriorate further. Nvidia did not immediately answer a request for comment.
Analysts at Goldman Sachs, JPMorgan Chase and Barclays issued positive assessments this week, citing CoreWeave's GPU-backed loans and investment-grade customers, including Microsoft and Meta. Goldman Sachs analysts raised CoreWeave's rating from hold to buy and emphasized CoreWeave's strength relative to neocloud competitors. Goldman Sachs analysts said CoreWeave likely ranks in the top quartile, and possibly the top decile, for performance and execution.
CoreWeave Shares Drop 29% as Debt Yields Rise and Market Confidence Wanes
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Summary
Market confidence in CoreWeave has weakened as shares slid 29% this month, valuing the firm at around $34 billion. Rising unsecured debt yields and widening credit default swap spreads have raised concerns about its financial stability. The five-year CDS spread surged 164% in a year to 10.67%. Analysts point to market trends showing rising interest rates and caution toward AI infrastructure spending. CoreWeave faces $20.7 billion in debt maturing through 2030, with $14.9 billion after that. CEO Mike Intrator mentioned infrastructure-backed lending and equity raises as possible solutions. A $10.1 billion free cash flow shortfall is expected when it reports Q3 results next month.
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