CoreWeave Stock and Debt Under Pressure as AI Neocloud Confidence Slips

CoreWeave went public in March of last year and reached a peak market value of about $90 billion three months later. It is now valued at roughly $34 billion. The spread on its five-year credit default swaps, which insure against default, has risen 164% over the past year and 30% in October, and last stood at nearly 1,067 basis points, or 10.67%, CNBC reported. CoreWeave declined to comment.

Barclays credit analyst Andrew Keches wrote in a Tuesday note that sentiment toward tech corporate debt is "decidedly negative" and highlighted "the speed at which AI vibes are shifting on a day-to-day basis," according to CNBC.

The pressure is visible across the neocloud sector. Nebius shares are down 27% this month and IREN is down 32%. In Australia, data center operator NextDC fell 40% on Wednesday after cutting its annual earnings forecast. Australian data center company Firmus scrapped its planned IPO earlier this month, citing market volatility and conditions. U.K. neocloud Nscale, which filed to go public on the New York Stock Exchange last month, is now being watched to see whether it proceeds; a representative declined to comment.

CoreWeave is the largest of the group and is closely tied to the U.S. AI market. Nvidia is its top institutional investor with a stake of about 9%, according to FactSet, and more than two-thirds of CoreWeave's revenue last year came from Microsoft. The company has about $20.7 billion in debt coming due through 2030 and another $14.9 billion thereafter, with the prospect of higher interest rates on future financing.

Sources on credit desks told CNBC that the high-yield debt market is effectively on hold until after the midterm elections in two weeks, given concerns about political pushback facing data centers. One source, who asked not to be named because of the sensitivity of the matter, said fixed-income investors "want permitting and regulatory requirements to be substantially resolved" before committing financing. Seth Meyer, global head of client portfolio management at Janus Henderson, said in an interview that "given recent turbulence, pausing makes sense."

CoreWeave CEO Mike Intrator, who co-founded the company in 2017 initially as a crypto mining venture, sent a memo to employees on Thursday to try to tamp down concern, CNBC reported. Intrator stressed that the company maintains a range of funding options. "Our financing model combines infrastructure-backed borrowing, corporate debt, equity, and customer prepayments," he wrote, adding that the company has "additional flexibility to raise equity over time as market conditions and our capital needs warrant."

CoreWeave had $5.5 billion of cash and equivalents at the end of the second quarter and is expected to report third-quarter results next month. Analysts expect negative free cash flow in the period to swell to $10.1 billion, the highest since the company started reporting quarterly financials, according to FactSet. Baird software analyst Rob Oliver estimated CoreWeave will need roughly $30 billion in capital in 2027. "Earnings may address financing measures to shore up confidence," Oliver said in an interview. "But they wouldn't need that capital until the first quarter."

A further question is whether Nvidia would step in if necessary. Nvidia, which supplies the GPUs CoreWeave rents out, invested $2 billion in January for a 10% stake at $87.20 a share. The stock now trades at $61.82, even after jumping 6% on the day the investment was announced. Nvidia CEO Jensen Huang said last week that CoreWeave does not need a backstop, while some investors say further participation from the chip giant may be necessary if credit conditions continue to worsen. Nvidia did not immediately respond to a request for comment.

Analysts at Goldman Sachs, JPMorgan Chase and Barclays published bullish notes on CoreWeave this week, pointing to its GPU-backed loans and investment-grade customers including Microsoft and Meta. Goldman analysts emphasized the company's strength relative to many neocloud competitors and upgraded their rating to buy from hold. "Not all neoclouds are created equal," they wrote.