The Daily Breakdown takes a closer look at CoreWeave, as the selloff in its stocks and bonds weigh on the AI trade. Interested in more Deep Dive content? Check out our latest research.
At Thursday’s intraday low, CoreWeave shares had lost more than one-third of their value from last week’s high. With the stock testing a key technical support area, bulls are not only hoping for the share price to stabilize, but also for more clarity around the fundamentals.
Shares are now down 62% from their all-time closing high, while the stock’s one-day 19.2% earnings-fueled gain in August feels like a distant memory. So let’s dig into what’s happening — and what it could mean for the broader AI trade.
Bonds Are Steering the Ship
When bond prices fall sharply and yields surge, investors are demanding more compensation for taking on credit risk. That doesn’t mean bankruptcy is imminent, but it does signal greater concern about a company’s financial position.
CoreWeave issued $1.25 billion of senior unsecured notes in June with a 9.625% coupon, maturing in July 2032. Those bonds were issued at par, or 100 cents on the dollar, but traded below 80 cents this week, pushing the yield above 15%.
That rattled equity investors too. If elevated borrowing costs persist, CoreWeave may have to finance future growth at much higher rates, putting additional pressure on profitability in an already capital-intensive business.
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Diving Deeper — The AI Trade Impact
Analyst expectations for CoreWeave remain aggressive, with Bloomberg consensus calling for roughly 150% revenue growth this year and around 100% next year. But revenue tells only part of the story.
Adjusted loss per share is expected to widen significantly this year, while Bloomberg consensus does not expect positive GAAP earnings until fiscal 2029. Meanwhile, CoreWeave’s total indebtedness jumped from $11.2 billion a year ago to $35.6 billion as of June 30.
So while revenue growth has been stellar, financing that growth has required a rapidly expanding balance sheet. That brings us to another term investors may have heard around the AI trade: “circular financing.”
Circular financing describes an ecosystem where companies can be investors, suppliers, customers, or financing partners to one another. That doesn’t make these relationships inherently problematic, but it can make it harder to separate underlying demand from spending supported within the ecosystem.
CoreWeave is a good example. It serves major customers including Microsoft, OpenAI, and Meta, while relying on Nvidia GPUs. Nvidia is also a major CoreWeave investor, having invested another $2 billion earlier this year, and has committed to purchase certain unused CoreWeave capacity through 2032.
That interconnectedness helps explain why CoreWeave concerns can ripple across the AI trade. Neocloud peers like Nebius and IREN can come under pressure as investors reassess financing costs, while similar worries can spread to chips, memory, storage, and other suppliers if expectations for data-center spending weaken.
The Bottom Line
CoreWeave’s recent turbulence does not necessarily indicate that the broader AI sector will experience similar challenges. Demand for AI compute remains substantial, and CoreWeave has built a large backlog supported by major customers.
But strong demand and strong economics are not necessarily the same thing. CoreWeave’s growth requires enormous amounts of capital, and higher borrowing costs could make that growth more expensive. For the broader AI trade, greater scrutiny around how the buildout is financed may be healthy — and increasingly important.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.