The Zhitong Finance App learned that before the US stock market on Thursday, CoreWeave (CRWV.US) fell more than 6%. On the previous trading day, the stock plummeted 15.5%, the biggest one-day decline in eight months. Market concerns mainly focus on a sharp drop in corporate bond prices, high debt, and continued losses.
Amid a wave of global chip stock sell-off triggered by heightened concerns about the sustainability of AI infrastructure spending, CoreWeave became the focus of traders' attention. This round of sell-off sparked a long and short debate: viewers pointed out that cloud demand is strong, while skeptics warn that once demand weakens, CoreWeave may be the first to feel pain.
“If the AI cycle comes to a standstill, CoreWeave will bear the brunt, and its equity value will return to zero.” D.A. Davidson analyst Gil Luria said on the Prot G Markets podcast on Wednesday. “The reason is that it is the epitome of bad behavior — borrowing at extremely high interest rates to build speculative assets.”
Other new cloud service providers such as IREN Ltd (IREN.US) and Nebius (NBIS.US) all fell more than 3% before the market on Thursday.
Stock bonds double kill the probability of a five-year default is over 50%
CoreWeave plummeted 15.5% on Wednesday. Earlier, it was reported that the price of the company's unsecured bonds due in 2032 fell below 80 cents. This level is generally regarded as the threshold for financial stress to occur. According to Dow Jones market data, CoreWeave's five-year credit default swap (CDS) cost has risen to about 881 basis points, which means that the probability of market pricing default is over 50% within five years.
Skeptics are also concerned about the huge debt of this new cloud service provider. According to Fiscal AI data, CoreWeave's total debt increased 221% year-on-year to $72 billion last quarter. The company had a net loss of US$626 million and revenue of US$2.58 billion for the quarter, and said the backlog of orders increased to US$104 billion.
“High risk game.” SpaceX CEO Elon Musk posted on X in response to posts about investors selling off CoreWeave debt and driving up risk.
Wednesday's wave of sell-offs stemmed from a Gartner report. The agency warned that AI infrastructure will face the risk of large-scale depreciation by 2030, and it is expected that more than 80% of new cloud service providers will not be able to survive on their own, even though related expenses are still surging.
According to reports, an internal memo revealed that CoreWeave CEO Mike Interrato called the market reaction “irrational.” “We are confident in our business model, our customers, the superior quality of execution, and the strict discipline that surrounds our financial engine,” Intertrato told employees.
Retail sentiment turns bullish
On Stocktwits, retail sentiments about CoreWeave changed from “neutral” the day before to “bullish.”
“Today everyone is debating whether CoreWeave is bullish or bearish. I think the real question is simpler: can they continue to finance growth at around 9% of borrowing costs when the return is less than the cost of borrowing? I can only wait and see until cheaper funding comes along.” A trader said.
Another trader wrote, “The S&P 500 is still up about 13% this year, but are we panicking because of a hot CPI data? This kind of callback is normal. The need for AI hasn't disappeared overnight. I'm just following my stocks and not pressing the panic button. ”
CoreWeave shares have declined for five days over the past six trading days. The stock is down 8% cumulatively since this year.