CoreWeave shares plunge as bond yields near 15% amid AI financing concerns

CoreWeave's shares dropped 16% on Wednesday while yields on its 9.625% bond due in 2032 rose to 14.8% and its 9.75% bond due in 2031 climbed to about 14.9%, indicating a sharp decline in bond prices.

Luis Alvarado, co-head of global fixed income strategy at Wells Fargo Investment Institute, said investor sentiment has shifted, with investors now demanding higher risk compensation.

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

Tech investor Chamath Palihapitiya highlighted the rising yields on X, prompting a brief response from Elon Musk. Palihapitiya pointed out that the 2032 bond yield had touched 15% and closed at a new high, and he questioned whether AI-related borrowing is creating a private credit bubble.

Paul Meeks, head of technology research at Freedom Capital Markets, described CoreWeave's balance sheet as "relatively bad" compared with peers because the company has borrowed more to fund new data centers. He said the higher yields reflect concerns about the company's ability to service its interest expense, though he does not view the situation as deteriorating.

Meeks expects CoreWeave to report flat margins from June to September and to see a significant margin improvement from September to December, with the next earnings report due in November.

The broader tech sector also felt pressure, with Oracle shares falling nearly 7% and its bond yields rising, while the Nasdaq Composite slipped 1.4%. Other AI-focused cloud providers, such as Nebius, saw their stocks decline, and Dell fell 10%. JPMorgan projects hyperscalers will spend $800 billion on AI infrastructure this year, rising to over $1 trillion annually by 2027.