Yesterday, AIcompute sector's hottest company, CoreWeave, experienced a simultaneous decline in both its stock and bonds.
CoreWeave dropped 15.46% to close at $65.78, with an intraday peak decline of 17%.
The bond side is even more severe: bonds maturing in 2032 have fallen below 80 cents on the dollar, yielding over 15%; bonds maturing in 2031 have surged to a yield of 16.2%. The five-year credit default swap spread has breached 1,194 basis points, implying a market-implied probability of default over 60% in the next five years.
Bloomberg analysts described it as: CoreWeave's bonds "have fallen to levels typically seen only with distressed companies."
The catalyst for all of this was a single word replied by Elon Musk on X.
A “Yikes” sent the entire sector spiraling
In the late hours of October 13, Silicon Valley investor Chamath Palihapitiya posted a chart on X showing the yield trajectory of CoreWeave’s bonds maturing in 2032. The chart revealed that the yield had just reached 15%.
Palihapitiya questioned whether the AI infrastructure boom is creating a private credit bubble, noting that the additional premiums demanded by lenders for AI-related risks are “surprisingly low.” Hours later, Musk replied to the post with a single word: Yikes.
CoreWeave plunged 15.46% today, sparking panic across the new cloud sector: Nebius fell over 10%, and IREN dropped more than 12%. The selling pressure also spread to Oracle and Dell, with Oracle down nearly 7% and Dell sliding over 11%.
The power of a single word comes from its ability to pierce through something unspoken. Musk is the CEO of SpaceX, and SpaceX itself is also building data centers on a large scale—his “Yikes” sounds more like the instinctive reaction of an insider seeing bond yield numbers.
NVIDIA's "favorite child"?
CoreWeave’s business model can be summed up in one sentence: borrow money to buy NVIDIA GPUs and rent out the computing power.
NVIDIA currently holds approximately 47.2 million shares of CoreWeave, representing about 10% ownership and making it the second-largest shareholder. In January of this year, NVIDIA made an additional investment of $2 billion at $87.20 per share, and both parties signed an agreement under which CoreWeave commits to deploying over 5 gigawatts of NVIDIA computing capacity by 2030, while NVIDIA guarantees support for unused capacity up to $6.3 billion.
You buy my chips, I invest in your company, and I lease your computing power—closed loop. As a result, CoreWeave became NVIDIA’s largest single holding, accounting for 91% of its portfolio.
But the deeper the binding, the more concentrated the risk.
If Musk's tweet was the spark, the explosives were already in place.
On the same day CoreWeave plummeted, Gartner released a new forecast report for the cloud industry, with a core conclusion that is straightforward: by 2030, more than 80% of new cloud providers will be forced to cease independent operations due to cost pressures and a lack of differentiated business models.
Gartner has done the math: By 2030, AI data center operators will need to generate a cumulative $8.5 trillion in revenue to cover announced capital expenditures, financing costs, and achieve a 12% return on investment. However, the enterprise and consumer AI revenue attributable to AI data centers during the same period is projected to be at most $3.6 trillion. The gap is nearly $5 trillion.
Even more harshly, since most AI-native companies operate with lightweight asset models, Gartner predicts that “service providers with substantial AI infrastructure will account for less than half of AI revenue.” Those investing heavily in data centers end up with the smallest slice of the pie.
CoreWeave’s financial data precisely confirms this. As of the end of June, the company had liabilities of approximately $35 billion and cash of only about $5.5 billion, bringing total liabilities, including lease obligations, to approximately $52 billion. Interest expenses in the second quarter surged to $640 million, more than double the $267 million recorded in the same period last year. The company reported a net loss of $626 million for the quarter and expects interest expenses in the third quarter to rise further to between $860 million and $940 million.
S&P has assigned CoreWeave a B+ rating, within the speculative grade range. S&P analysts commented that the company "spends like a hyperscaler but lacks a hyperscaler's balance sheet," noting that CoreWeave's borrowing costs are approximately 9%, while its return on investment is only around 1%. Even if the company achieves its target return of 4% to 5%, it would still be unable to cover its financing costs.
Old Huang rushes to put out the fire
After the stock price plummeted, Jeff Hsu was asked about CoreWeave at an event in Stockholm.
His response was: "CoreWeave's strength is growing every day, and I'm optimistic that their cost of capital is actually decreasing."
He also explicitly stated that NVIDIA had no need to provide financial guarantees for CoreWeave. Following this statement, CoreWeave rebounded nearly 6% on Thursday, closing at $69.69.
But while reassurances are one thing, the signals from the options market tell a completely different story: Cboe LiveVol data shows that the number of put options contracts for CoreWeave is close to 200,000, while call options number only around 106,000, with options trading volume surging to more than seven times the 30-day average.
There are far more people buying the dip than buying the rally.
BofA Securities senior technology analyst Tal Liani released a bullish report on CoreWeave on the same day, setting a $140 price target.
But he also spoke a hard truth: “Don’t forget that NVIDIA is essentially financing all of these transactions... they want to make sure CoreWeave and other companies use NVIDIA’s GPUs instead of AMD’s.”
In other words, the market weighs how much of Huang Renxun’s “optimism” stems from confidence in CoreWeave’s independent ability to repay its debts, and how much is driven by a desire to protect NVIDIA’s own GPU ecosystem.
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