CoreWeave shares, bonds slide further as AI debt fears mount

CoreWeave's shares and bonds experienced a significant decline on Thursday, with the company's stock falling by 6% during premarket trading. This drop followed a more than 15% decrease on the previous day, marking one of the steepest declines among global tech stocks. The yield on CoreWeave's April-issued bonds due in 2031 surged past 16%, signaling growing investor concerns.

The company's debt, totaling around $50 billion, has become a focal point for doubts about the sustainability of the tech industry's data center boom. Critics argue that the heavy borrowing needed to fund the procurement of expensive Nvidia processors leaves these firms vulnerable to any cooling in AI demand, as well as the depreciation of chips as newer generations emerge.

CoreWeave, part of the neocloud sector, is expected to report nearly $13 billion in revenue this year but will also post a loss of $2.13 billion. The broader tech sector has faced increased pressure, with the Philadelphia Semiconductor Index losing over $1.6 trillion in market value over the past six sessions and the tech-heavy Nasdaq declining more than 3% during the same period.

CoreWeave's CEO, Mike Intrator, dismissed these concerns in a memo to employees, stating that the company's deal backlog exceeds its debt obligations. However, research firm Gartner predicts that about 80% of neocloud firms could shut down by 2030, and AI infrastructure spending could face impairment if AI providers continue on their current investment trajectory.