CoreWeave credit default swaps hit distress levels as investors sour on AI debt

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CoreWeave's credit stress continued to spiral on Thursday amid a broader sell-off in AI-related names.

CoreWeave — a so-called neocloud company — has taken on more than $51 billion of debt and obligations to finance its AI infrastructure buildout. It's now facing a rebellion from stock and bond investors as concerns mount about AI overspending and debt levels.

Yields on CoreWeave debt have continued to climb, with the yield to maturity on its 9.75% bond due in 2031 reaching 15.78%. Bond yields move inversely to prices. Meanwhile, the spread on its five-year credit default swaps, which are insurance against default, at one point soared above 1,140 basis points. It last stood at 1,088 bps — a 33% week-over-week jump and 177% higher than a year ago.

Coreweave's 5-year credit default swap spread

Credit concerns are spreading into AI equities too. CoreWeave's stock was down again Thursday, adding to Wednesday's 15.5% nosedive.

Other neocloud stocks were under similar pressure. Nebius was down 5% and Iren sank 8% in Thursday trading.

Anxiety about AI overspending is also spreading. For instance, shares of Micron Technology and Advanced Micro Devices shed 4% and 6%, respectively, following a big sell-off in South Korean chip stocks.

While AI debt worries have been rising steadily, investors have suddenly grown skittish about the underlying finances of companies borrowing heavily to buy chips, build data centers, and rent out computing power.

Coreweave's credit default swaps are one place to see that stress.

Credit default swaps are contracts where buyers pay for protection in case the borrower can't repay its debt. The spread widening in CoreWeave's CDS means investors view the debt as riskier.

The market is "basically saying 'no mas' to AI debt without operating cash flow support," the Evercore ISI trading desk said.

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