CoreWeave and AI Infrastructure Stocks Plummet Amid Debt Fears
CoreWeave and other AI infrastructure firms saw shares and bonds collapse Wednesday as investors feared excessive borrowing and potential Federal Reserve interest rate hikes.
Shares and bonds of AI infrastructure companies plummeted Wednesday as investors grew concerned over excessive borrowing for artificial intelligence build-outs. CoreWeave saw its stock fall between 9.5% and 16%, while its 2031 and 2032 bonds saw yields climb toward 15%. The 2032 bond breached the 1,000bps G-spread distressed level, trading below 80 cents on the dollar.
The slump coincided with rising bets on a Federal Reserve interest rate hike following hot consumer price data, which pushed Treasury yields higher. This environment intensified scrutiny of the private credit bubble associated with AI spending, which is projected to exceed $1 trillion annually by 2027. S&P Global Market Intelligence reported that the cost of insuring debt against defaults for firms like CoreWeave and Oracle has surged to record highs.
Other sector participants faced significant losses, including neocloud firm Nebius, which dropped 15.1%, and hyperscaler Oracle, which saw a nearly 7% share price decline. Server makers Dell and HPE also fell after Barclays downgraded their ratings to equal-weight, citing a lack of a meaningful AI inflection. Analysts suggest the era of easy money is dissipating as the market demands higher risk compensation for AI-related debt.
