CoreWeave Shares Fall 15.5% as Debt Concerns Grow for AI Boom
CoreWeave shares fell sharply as borrowing costs climbed, intensifying investor concerns about debt used to build AI infrastructure. D.A. Davidson analyst Gil…
CoreWeave stock fell 15.5% on Wednesday as rising bond yields sharpened investor concerns about the debt used to build artificial intelligence infrastructure. D.A. Davidson analyst Gil Luria warned that shareholders could lose their equity if the AI spending boom weakens, despite the company’s $104 billion revenue backlog.
The sell-off hit both the company’s shares and its debt. CoreWeave’s 9.625% bond due in 2032 had a yield to maturity of 14.8%, while its 9.75% bond due in 2031 yielded around 14.9%, according to CNBC. Bond yields rise when prices fall, reflecting investors’ demand for greater returns to lend.
Chief Executive Mike Intrator pushed back against the market reaction in a memo obtained by CNBC. “We are confident in our backlog which more than supports all of our debt obligations,” he wrote.
The pressure matters beyond CoreWeave: investors are reassessing how much debt AI infrastructure companies can carry while building data centers and expanding capacity. CoreWeave’s next quarterly results are expected in November.
Analyst warns of equity risk
Luria made his warning on the Prof G Markets podcast, saying CoreWeave could be especially exposed if the AI investment cycle turns. He remains bullish on AI demand, but argued that the company’s borrowing costs could make it harder to meet debt obligations if growth slows.
He said CoreWeave borrows at around 9% and estimates it earns returns of about 1% on its investments. Even the 4% to 5% returns the company is targeting would be below its borrowing costs, Luria said. He compared the approach to borrowing at 9% to buy Treasury bonds yielding 5%.
“The equity value is going to be zero,” Luria said. The statement describes a downside scenario, not his formal price forecast. D.A. Davidson downgraded the stock to Neutral from Buy in May and cut its price target from $175 to $100.
CoreWeave reported $640 million in second-quarter net interest expense, more than double the $267 million recorded a year earlier. It also posted a $626 million net loss. A separate Yahoo Finance report said revenue more than doubled over the same period to $2.58 billion.
The company’s combined debt and lease obligations stood at approximately $52 billion at the end of June, according to the first Yahoo Finance report. Its $104 billion backlog represents contracted future revenue, not profit.
Borrowing and expansion in focus
CreditSights analyst Jordan Chalfin told the Financial Times that CoreWeave had been “very creative” with its financing. Investors, he said, were concerned about the contrast between long data-center leases and shorter customer contracts. “If there's an overbuild, why would [customers] renew their contract with CoreWeave?” Chalfin asked.
In a severe restructuring, creditors would have priority over shareholders. The distinction is central to the debate: a company can have contracted revenue and still leave equity investors exposed if financing costs and obligations outpace the returns on its investments.
Co-founder Brannin McBee defended the borrowing in comments to the Financial Times, arguing that it lets the company expand faster. “I don't look at that as scary debt at all,” he said. McBee said nearly all of CoreWeave’s 2027 capacity was sold, and argued that current spending reflects expansion rather than weakness in the existing business.
“If we stop building today, [we'd be] immensely cash-flow positive,” McBee said. The company is seeking cheaper financing from insurers to keep building AI infrastructure. Visible Alpha consensus forecasts cited by the Financial Times project $71 billion in cumulative negative free cash flow between 2026 and 2028.
Market concern has extended beyond CoreWeave. CNBC reported that Oracle shares closed down nearly 9% on Wednesday and another neocloud stock, Nebius, fell 10%. The Nasdaq Composite closed down 1.9% as technology shares weighed on the broader market.
Investors also focused on the company’s financing costs in public discussion. Chamath Palihapitiya posted a chart showing CoreWeave’s 2032 bond yield had “touched 15%” on Tuesday; Elon Musk responded, “yikes.” Meanwhile, Intrator said the company’s confidence rested on its contracted demand: “We are confident in our backlog which more than supports all of our debt obligations.”
Source: finance.yahoo.com
