CoreWeave Shares Swing as Credit Warnings Collide With Dip-Buying

According to the CNBC report, CoreWeave accumulated $51.6 billion in debt, about $46 billion net of cash, against a backdrop of zero historical profitability. It said CEO comments that the company aspired to be investment grade so it could borrow "unlimited sums" spooked investors, especially as they already anticipated nearly another $60 billion in debt over the next 18 months. Debt issued only in June had already fallen 20% since.

The report pointed to deepening stress in credit markets. Bonds issued at par in June at an 8.5% rate fell nearly 18% through last Friday, following a severe initial swoon in late July. Five-year credit default swaps jumped from 452 basis points in early June to more than 1,100 basis points this week, implying a roughly 60% probability of default within five years. Citing Bloomberg, the report said CoreWeave faces an estimated $16.45 billion in negative free cash flow in the second half of this year alone and another $30.6 billion in fiscal 2027.

With a 15% cost of capital, the report said the structural hurdle rate for new business is staggering. Even with optimistic pricing power through 2028, forecast debt-to-EBITDA at fiscal year-end 2028 sits at 4.5x, and that assumes the company hits all its ambitious numbers. Because CoreWeave is levered more than 2:1, a 10% move in enterprise value translates to nearly a 22% swing in equity value. Options premiums were in the 6th percentile last week, 1.5 standard deviations below the one-year mean, though at 72% they were not cheap in absolute terms, the report said.

Equity sentiment remains fiercely divided. HSBC maintained a Sell rating with a $39 price target, essentially calling for the stock to be cut in half, while BNP and Cantor Fitzgerald suggested the fears are overblown and the stock should more than double from here. Nvidia CEO Jensen Huang downplayed systemic concerns, ARK Investment bought 192,000 shares, and BofA argued that CoreWeave's ability to bring active power online at scale, combined with higher pricing from Nvidia's upcoming Vera Rubin deployments, will drive faster-than-expected revenue growth. BofA described execution risk as a bigger concern than financing, the report said.

The CNBC report also outlined a November 80/January 72.5 call diagonal trading just under $6 per spread, almost 9% of the current stock price. The structure involved buying January 72.5 calls at $10.25 and selling November 80 calls at $4.30. It said going outright long or short into earnings carries excessive directional risk given the distressed credit and heavily defended equity.