“Yikes.” That’s the market’s reaction on Wednesday surrounding CoreWeave, which rents high‑end GPU compute to firms developing AI tools, after its 2032 bond yield jumped to nearly 15% and prices slipped into distressed levels.
The comment came from Elon Musk, reacting to a chart posted on X by investor Chamath Palihapitiya that illustrated the rise in CoreWeave’s bond yield. CoreWeave sold the bonds in June at 9.625%. Palihapitiya also added an analysis suggesting AI is inflating a private‑credit bubble.
The stock dropped on debt worries, falling as much as 17% to $64.41. At the same time, credit default swaps— the price of protecting against a default— spiked.
The rising yield shows investors demand higher compensation for holding the bonds due to perceived increasing risk. CoreWeave has taken on substantial debt this year, raising over $30 billion in the debt market and carrying more than $50 billion of debt outstanding at the end of June.
Even before Wednesday’s sell‑off intensified, pessimistic views about CoreWeave were already circulating. D.A. Davidson’s veteran tech analyst Gil Luria speculated on a podcast that CoreWeave’s shares could plummet to zero if the AI spending boom fades. The main risk, he said, is customers not renewing contracts if the sector overbuilds.
The company has benefited from the rush to build AI data centers needed to run the suddenly pervasive technology. Yet industry and market observers debate whether a compute glut is emerging that could erode profits for infrastructure providers like CoreWeave. Peers moved in lockstep on Wednesday, with Nebius Group down 11% and IREN Limited down 12%.
Other issues have surfaced recently in the AI infrastructure arena. Last week, Nvidia‑backed data‑center operator Firmus canceled a planned IPO in Australia, as investors scrutinize valuations more closely and separate winners from losers in the AI trade.