Wall Street weighs AI spending risks as CoreWeave stock falls

Wall Street analysts are reassessing the sustainability of the AI boom amid higher borrowing costs and recent weakness in AI-focused companies such as CoreWeave. The cloud-computing firm saw its shares drop and credit default swaps rise, prompting comments from market participants.

Dan Greenhaus, a strategist at Solus Alternative Asset Management, told CNBC that past market dips have often been over-interpreted as signs of an imminent bust, noting that “how many canaries have we killed in the coal mine over the last three years…only to see the broad market, both tech and otherwise, go on to make new highs?” He added that CoreWeave’s unsecured debt is “the riskier of the riskier AI buildout play,” but cautioned that rising rates could eventually pressure speculative projects.

CoreWeave CEO Mike Intrator responded in an internal memo that the company’s backlog is sufficient to meet its debt obligations, while Nvidia CEO Jensen Huang, whose company holds a stake in CoreWeave, said the firm’s “strength is improving every day” and its cost of capital is decreasing.

Meanwhile, earnings from AI chip supplier Taiwan Semiconductor suggest demand for AI hardware remains solid. However, Gartner warned that AI data-center owners will need to generate $8.5 trillion in revenue through 2030 to cover capital spending and financing costs, a target far above the projected $3.6 trillion in enterprise and consumer AI revenue.

Bank of America analysts described the current AI investment surge as following a classic capital cycle that often ends in disappointment, citing high early profit margins, over-investment, excess capacity and intensifying competition, particularly from Chinese open-weight models. They noted that declining business spending on AI, despite higher token volumes, could exacerbate the “monetization disappointment” seen in previous cycles.