Jensen Huang says CoreWeave is improving as the cost to insure its debt hits a record

Nvidia $NVDA CEO Jensen Huang pushed back on worries about CoreWeave's finances on Thursday, saying the AI computing supplier is getting stronger even as its debt load drags on the company's stock and bonds. Nvidia is both a CoreWeave investor and a major supplier to the company.

"CoreWeave's strength is improving every day," Huang told Bloomberg at an event in Stockholm. "I'm optimistic. Their cost of capital is actually decreasing."

CoreWeave stock gained 5.9% on Thursday to close at $69.69. The stock had dropped on Wednesday by its steepest margin since February, according to Bloomberg, after a company co-founder spoke about CoreWeave's push to raise funds from insurers, which he described as "unlimited" pools of money.

This week, the price of insuring CoreWeave's five-year debt against default climbed by as much as 74.5 basis points, reaching 1,194.5 basis points, according to Bloomberg. That is an all-time high for an intraday reading, according to Bloomberg. Bloomberg said that, based on pricing in the credit-default swap market, traders were assigning better than 60% odds that CoreWeave would default sometime in the next five years.

CoreWeave's 2032 bonds, purchased by investors at face value four months ago, traded around 78 cents on the dollar on Wednesday.

Nvidia ranks as the No. 2 holder of CoreWeave stock, owning roughly 10% of the company, according to Bloomberg. CoreWeave carries over $40 billion in debt, and a large share of it must be repaid inside five years, according to Bloomberg. Servicing that debt is eating into the company's cash, and its free cash flow has been sinking further below zero, according to Bloomberg.

CoreWeave's borrowing has drawn attention because companies like it have funded their expansion partly through backing from vendors such as Nvidia. That arrangement has stirred worries that money looping between suppliers and customers is manufacturing artificial demand for AI computing, according to Bloomberg.

Stocks have fallen worldwide this week as investors worry that spending on AI infrastructure has raced ahead of what companies can earn from it. The Philadelphia Stock Exchange Semiconductor Index has shed about 9% this week.