The cracks in AI infrastructure financing models are widening at an accelerating pace.
Under the dual pressure of unexpectedly hot inflation data and rising US Treasury yields, data center operator CoreWeave, Inc. (NASDAQ: CRWV) saw its shares plunge more than 15% on Wednesday, marking the third-largest single-day decline in its history and leaving it just a step away from its all-time low.
Meanwhile, the yield on the company's 2032-maturity bonds broke through 15%, officially entering distress territory. This selloff wiped out approximately $80 billion in combined market value across multiple AI infrastructure stocks in a single day, including CoreWeave, Inc. (NASDAQ: CRWV).
D.A. Davidson analyst Gil Luria issued a warning on a podcast, stating that if CoreWeave, Inc. (NASDAQ: CRWV) is unable to repay its high-cost debt, the company's "equity value will go to zero."
According to Bloomberg, CoreWeave, Inc. (NASDAQ: CRWV) CEO Mike Intrator promptly issued an internal memo characterizing the stock plunge as "irrational" market behavior, expressing continued confidence in the company's business model, financial condition, and order backlog, and stating that the backlog is sufficient to cover all debt repayment obligations.
This selloff is not an isolated event. Persistently hot US inflation data pushed the 30-year Treasury yield as high as 5.63% intraday, suddenly exposing the hidden financing cost risks for capital-intensive AI companies.
Oracle fell about 9% in a single day, Dell Technologies dropped more than 11%, AI infrastructure provider Nebius declined 10%, and the Nasdaq 100 index fell 2% overall.
Bond Market Alarm Sounded Weeks Before Stocks
Pressure signals in CoreWeave, Inc. (NASDAQ: CRWV) bond market had already emerged weeks earlier, but the stock market did not react until this week.
According to LSEG data, CoreWeave, Inc. (NASDAQ: CRWV) has issued approximately $22 billion in bonds and $26 billion in loans. Its bonds issued in June with a 9.625% coupon now carry a yield of approximately 15%, a level typically seen in CCC-rated or lower junk bonds.
The bond price has fallen below 80 cents, officially entering what the market defines as "deep distress" territory, and its spread over Treasuries has crossed the 1,000 basis point default warning threshold.
As previously reported, this Nvidia-backed AI cloud service provider has raised over $35 billion cumulatively this year through chip-collateralized loans, high-yield bonds, convertible bonds, and stock offerings.
Its co-founder Brannin McBee stated that once more chip-collateralized debt receives investment-grade ratings, CoreWeave, Inc. (NASDAQ: CRWV) can unlock access to insurance company capital, where the capital "is limitless — it is all the money in the world."
CreditSights analyst Jordan Chalfin told the Financial Times that CoreWeave, Inc. (NASDAQ: CRWV) has been "extremely creative" in financing, but investors are deeply concerned about the mismatch between its long-term data center leases and relatively short customer contracts.
He asked:
If oversupply occurs, why would customers renew their contracts with CoreWeave, Inc. (NASDAQ: CRWV)?
Even Musk responded on social media to CoreWeave, Inc. (NASDAQ: CRWV) bond pressure, stating that "demand for supercomputing data centers is indeed very high, but financing construction involves complex hardware systems for large-scale power, cooling, and networking — actual execution is a completely different matter."
Analyst: Borrowing Costs Far Exceed Investment Returns, Equity Value Faces Zero Risk
Luria's core logic points directly at the fundamental flaw in CoreWeave, Inc. (NASDAQ: CRWV) business model: the company borrows at approximately 9% interest but earns a return on investment of only about 1%, and even by the company's own target of 4% to 5%, it still falls below its cost of financing.
He likened this to borrowing at 9% to buy US Treasuries yielding only 5% — a value-destroying strategy.
Financial data confirms this assessment. CoreWeave, Inc. (NASDAQ: CRWV) second-quarter net interest expense reached $640 million, doubling year-over-year (from $267 million in the same period last year), while its net loss for the period was $626 million, with interest expense accounting for approximately 25% of revenue.
As of the end of June this year, CoreWeave, Inc. (NASDAQ: CRWV) total debt and lease obligations stood at approximately $52 billion. According to Visible Alpha consensus forecasts, the company is expected to accumulate negative free cash flow of $710 billion between 2026 and 2028, with an estimated negative $25 billion this year and approximately negative $28 billion next year.
Facing external skepticism, CoreWeave, Inc. (NASDAQ: CRWV) co-founder Brannin McBee told the Financial Times that he "does not find these debts concerning at all," stating that borrowing is intended to accelerate expansion.
He also stated that the company is expected to achieve investment-grade credit ratings "within a few years," and said that "if we stopped building today, (the company) would immediately enter a highly positive cash flow state."
However, according to S&P Capital IQ data, CoreWeave, Inc. (NASDAQ: CRWV) three co-founders have cashed out approximately $2 billion through stock sales this year. McBee characterized this as personal wealth diversification, emphasizing that most of their wealth remains in company stock.
On prediction market platform Polymarket, traders currently assign a 17% probability to CoreWeave, Inc. (NASDAQ: CRWV) declaring bankruptcy before December 2027, rising to 27% by 2029.
Rising Rate Pressure Spreads Across AI Industry Chain
CoreWeave, Inc. (NASDAQ: CRWV) troubles reflect broader market concerns: in an environment of persistently high interest rates, the financing logic of capital-intensive AI infrastructure companies is facing systemic questioning.
Baird investment strategy analyst Ross Mayfield said in an interview with Reuters:
Long-end rates exceeding 5% and approaching 6% is a problem for marginal borrowers. For tiers below the four major hyperscalers, the situation will be far more difficult.
In contrast, hyperscalers represented by Alphabet, Microsoft, Meta, and Amazon have been relatively resilient in this selloff due to high profitability and sound management, with declines mostly around 2%.
Argent Asset Management portfolio manager Jed Ellerbroek noted that these four companies plus SpaceX account for approximately 75% of all US data center investment, and their data center investments have performed well in terms of returns.
However, CoreWeave, Inc. (NASDAQ: CRWV) is currently seeking lower-cost financing from insurance companies to sustain AI infrastructure buildout. But analysts note that with its unsecured bond yields already exceeding 15%, the prospect of finding cheaper funding sources than its existing capital structure is not optimistic.
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