Cathie Wood is defending CoreWeave's debt after ARK bought its stock this week

Cathie Wood, founder and CEO of ARK Investment Management, said it is typical for young companies that raise capital while interest rates are elevated to pay steep borrowing costs, as CoreWeave does, and that an investment in the AI computing supplier will pay off, according to Bloomberg. Wood spoke in an interview in Seoul on Friday.

ARK bought an estimated $25.8 million of CoreWeave stock across Wednesday and Thursday, according to Benzinga. Thursday's purchase was worth about $13.4 million and Wednesday's about $12.4 million. Wood told Bloomberg that ARK bought shares of CoreWeave and Cerebras Systems Inc. during this week's declines.

Wood likened CoreWeave to Coinbase, which saw its debt sell off before the company went on to profit from the expansion of the crypto industry. "Coinbase has evolved into a very strong, robust company and anyone who bought back then has been rewarded handsomely," she said, according to Bloomberg. "This happens very often with young companies."

Nvidia $NVDA CEO Jensen Huang, whose company is CoreWeave's second-largest shareholder, said CoreWeave's cost of capital is falling, according to Bloomberg. Huang also said the company's "strength is improving every day" and that he saw no need for Nvidia to backstop it, according to Benzinga.

CoreWeave stock rebounded on Thursday after a three-day slump of 20%. Its debt was priced at levels signaling distress this week, and a gauge of its credit risk climbed to a record, according to Bloomberg.

CoreWeave stock fell 16% on Wednesday as yields on its bonds jumped. The yield on its 2032 bond stood at 14.8%, and the 2031 bond yielded about 14.9%. CoreWeave reported net interest expense of $640 million in the second quarter, more than double the $267 million of a year earlier. During that quarter, it raised more than $10 billion in unsecured debt and convertible bonds, along with a $3.1 billion term loan. Its next quarterly results are expected in November.

Wood said the AI market is at a "very early" stage and rejected the idea that it is in a bubble. "The fear out there actually is good," she said, according to Bloomberg. "I'm talking about fear that AI, we're in a hype cycle. We do not believe we are, but the fact people are afraid means we are not in a bubble."