‘Yeah’: CoreWeave Stock Slumps on Bond Yield Concerns, CEO Accuses Market of Acting ‘Irrationally’
CoreWeave (CRWV) stock fell 15% on Wednesday, a day after a chart of its rising borrowing costs gained ground on X.
Bloomberg, citing an internal memo, reports that the AI Cloud company’s CEO said in a memo that the market was acting “irrationally.”
“When you build a new type of technology company, there will be periods when the market misunderstands and acts irrationally,” CEO Mike Intrator wrote to staff. “We are confident in our business model, in our customers, in the extraordinary quality of our execution and in the relentless discipline around the financial engine we have built.”
65.78 -12.03 (-15.46%)
At close: 4:00:01 p.m. EDT
65.49 -0.29 (-0.44%)
A bond’s yield increases as its price falls, so a yield close to 15% means investors want a high yield for lending money to CoreWeave.
Intrator added that “factors such as weakness and delays surrounding IPO and debt financing attempts” by several of CoreWeave’s competitors “bleed into the narrative around CoreWeave.”
On Tuesday, venture capitalist Chamath Palihapitiya released a chart showing that the yield on $1.25 billion in CoreWeave bonds maturing in 2032 “touched 15% today, then closed at a new high” of 14.5%.
“Is the development of AI creating a private credit bubble?” » asked Palihapitiya.
Musk, owner of the platform, responded with a single word: “Yeah.”
The selling spread to other AI cloud stocks: Nebius (NBIS) fell 11%, Oracle (ORCL) fell another 9%, and the following stocks sank more than 10%: DigitalOcean (DOCN), Hut 8 (HUT), Cipher (CIFR), TeraWulf (WULF), and IREN (IREN).
CoreWeave leases Nvidia (NVDA) chips to AI companies and pays for much of that hardware with debt. The company’s interest expense rose to $640 million in the second quarter, up from $267 million a year earlier, and lost $626 million during the quarter, according to data from Yahoo Finance. Revenue more than doubled during the same period, to $2.58 billion.
Total debt reached about $52 billion at the end of June, up from about $15 billion a year earlier.
The company is clearly looking for cheaper money. CoreWeave is seeking insurers’ vast capital reserves to finance its construction, the Financial Times reported Wednesday.
Co-founder Brannin McBee, who heads CoreWeave’s financing, told the FT that the investment grade ratings on more of its chip-backed debt would allow it to borrow from insurers, whose capital “is unlimited. It’s all the money in the world that’s in the insurance tranche”.
McBee said CoreWeave would continue to take out chip-backed loans: “I don’t view this as scary debt at all. I view this as debt acceleration and significant debt.”
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