A key corner of the AI trade in overnight US equities was hit hard, and traders are wagering things could get even worse.
So-called "neocloud" companies — firms that supply GPU compute power for AI as a service — saw their shares tumble, driven by ever-rising bond yields at Nvidia-backed CoreWeave, Inc. (CRWV.US). A report that CoreWeave is targeting insurance companies for further debt financing clearly did little to calm market jitters.
Meanwhile, Social Capital founder Chamath Palihapitiya posted on X with a screenshot showing CoreWeave's bond yield hitting 15% and questioned the private credit bubble. Elon Musk replied "yikes."
CoreWeave, Inc. (CRWV.US) shares plunged 15%. Other popular data center construction trades, Nebius Group and Iren, also fell as much as 10% at one point.
The options market was equally volatile. CoreWeave options volume surged to more than seven times its 30-day average, Nebius approached four times, and Iren hit twice its normal level. Cboe LiveVol data show call volume outpaced puts for Nebius and Iren, but in both cases the calls were more likely initiated by sellers rather than buyers.
CoreWeave was the most bearish: traders bought nearly 200,000 puts, versus 106,000 calls.
Around 10 a.m. New York time, a standout trade appeared: someone opened a fresh position of 26,000 puts with a $37.5 strike expiring December 18, trading near the seller's asking price. SpotGamma data indicate those puts were bought.
"These are bubble puts. Not the kind of extreme options you buy to bet the company goes to zero. This is the nerve center and heart of the AI trade, and it's probably some kind of margin operation by someone hedging exposure in highly correlated stocks or even the Nasdaq," said Scott Bauer, CEO of Prosper Trading Academy in Chicago.
The contracts carried a premium of $0.74 each, or about $1.9 million in total, requiring CoreWeave to fall another 42% over the next two months just to break even. Before the trade, open interest in that series stood at just over 1,000 contracts, indicating a brand-new position.
CoreWeave, Inc. (CRWV.US) went public in March 2025 at $40 a share.
"Maybe this is an early investor or IPO participant saying this is my break-even point. Maybe they can't get that protection in other stocks, indices or other products," Bauer added.
The moves underscore how, as AI infrastructure financing scales up, the linkage between debt costs and equity volatility is strengthening.
Comments