CoreWeave's stock is down 29% this month while its bond yield climbs and its credit default swap spreads widen. Investors are questioning what additional financing options are available, even as several brokerages published bullish notes.
CoreWeave is valued at roughly $34 billion, with its stock down 29% this month. Its unsecured debt, meanwhile, carries a yield of about 15%. The company went public in March of last year and reached a peak market cap of about $90 billion three months later.
Credit markets signal stress
The spread on CoreWeave's five-year credit default swaps, which are insurance against default, is up 164% in the past year and 30% in October. It last stood at nearly 1,067 basis points, or 10.67%.
According to CNBC, many market participants view debt-heavy neoclouds as the most vulnerable trade in AI. Barclays credit analyst Andrew Keches wrote to clients on Tuesday, referring broadly to corporate debt in tech: "Sentiment is decidedly negative."
The pressure reaches beyond CoreWeave. Shares of Nebius are down 27% this month, and IREN's stock is down 32%. Australian data center operator NextDC plunged 40% on Wednesday after it slashed its annual earnings forecast.
A heavy debt load and a financing question
CoreWeave has about $20.7 billion in debt coming due through 2030 and another $14.9 billion thereafter. It had $5.5 billion of cash and equivalents at the end of the second quarter. Analysts expect negative free cash flow to swell to $10.1 billion in the third quarter, according to FactSet.
Sources on credit desks told CNBC that the high-yield debt market is effectively on hold until after the midterm elections in two weeks. CEO Mike Intrator sent a memo to employees on Thursday stressing that the company maintains a range of funding options. Baird analyst Rob Oliver is estimating roughly $30 billion in capital needs in 2027.
Nvidia's stake and the analyst response
Nvidia invested $2 billion in January for a 10% stake at $87.20 a share. The stock is now trading at $61.82. Nvidia CEO Jensen Huang said last week that CoreWeave doesn't need a backstop, but some investors say further participation from the chip giant may be necessary if credit conditions continue to worsen.
Still, analysts at Goldman Sachs, JPMorgan Chase and Barclays put out bullish notes this week, highlighting the company's GPU-backed loans and its investment grade customers like Microsoft and Meta. Goldman upgraded its rating to buy from hold.
Source: CNBC
Trading involves risk.
Risk Disclaimer
