CoreWeave stock falls 16% as its bond yields jump on AI debt worries

CoreWeave stock fell 16% on Wednesday as yields on its bonds jumped, a move tied to investor concern that technology companies are taking on excessive debt to build out artificial intelligence infrastructure, according to CNBC.

CoreWeave's 9.625% bond maturing in 2032 carried a yield to maturity of 14.8%, while the 9.75% bond maturing in 2031 yielded approximately 14.9%. As is standard with fixed-income securities, the rising yields reflected falling bond prices.

Chamath Palihapitiya, founder and CEO of investment firm Social Capital, shared a chart on X $TWTR showing the 2032 bond yield touched 15% on Tuesday and closed at a new high. Tesla $TSLA and SpaceX CEO Elon Musk replied "yikes," according to CNBC.

In a separate analysis, Palihapitiya found that private AI lending carries a mean premium of 6.2 percentage points over the base rate, just above the 6.1-point spread seen across other private credit loans, according to Benzinga.

According to CNBC, Wells Fargo $WFC Investment Institute's co-head of global fixed income strategy, Luis Alvarado, said AI sentiment among investors has changed, with investors now requiring greater compensation for the risks they are taking on.

"The era of easy money, which we experienced in the first nine months of the year, is starting to disappear and dissipate," Alvarado said, according to CNBC.

Paul Meeks, head of technology research at Freedom Capital Markets, said CoreWeave has borrowed more than its neocloud peers and is building more data centers, according to CNBC. He attributed the surge in yields to mounting market skepticism about whether CoreWeave can sustain its debt-servicing obligations going forward, though he said he does not view that skepticism as warranted. CoreWeave's next quarterly results are expected in November.

Other AI-linked companies also came under pressure. Oracle $ORCL shares lost nearly 7% and Nebius shed about 9%, while Dell $DELL dropped 10%. Oracle's bond market also weakened, pushing the yield on its 6.25% notes due November 2032 to 7.24%. The broader technology selloff dragged the Nasdaq $NDAQ Composite down 1.4%.

Hyperscalers are on track to spend $800 billion this year and more than $1 trillion annually by 2027, according to JPMorgan $JPM estimates cited by CNBC.

The International Monetary Fund warned on Tuesday that an AI-related market correction is one of three risks that could trigger a sharp tightening of financial conditions. The fund said hyperscalers account for 10% of global investment-grade bond issuance, up from under 1% in 2024.