CoreWeave Drops 15%, AI Computing Power Business Faces Financing Test

Hundred-billion-dollar orders can't sustain a 15% borrowing cost—the commercial logic of AI infrastructure is now being directly tested by the capital markets.

CoreWeave shares plummeted about 15% in a single day on Wednesday, with the after-hours price dropping nearly another 6%. Bond prices have fallen into distressed territory, and credit default swap pricing indicates the probability of default within five years now exceeds 50%. At the same time, AI infrastructure-related stocks such as Oracle, Nebius, and Dell all fell, with pressure rising across the high-yield bond market.

CEO Michael Intrator immediately sent an internal memo to employees, stating that the company had more than $104.2 billion in backlog orders, "fully sufficient to support all debt obligations," attributing the market selloff to "misunderstandings and irrational behavior." However, this reassurance failed to stop the slide.

Backlog orders do not equal cash; fulfillment requires ongoing investments in GPUs, data centers, and power infrastructure. The real concerns for the market are the timing of revenue realization, project profitability, and whether cash flow can cover interest and capital expenditures. In an environment of sharply rising financing costs, CoreWeave’s "build first with borrowed money, then realize contract income" model is under question—does the economic math still add up?

D.A. Davidson analyst Gil Luria remarked: “If CoreWeave borrows at a 9% cost, but the best return they can get is 5%, then no matter how large they scale, it makes no sense: every step they take destroys value.”

Bonds Fall Into Distressed Territory, Default Insurance Hits Record High, Musk Responds: Yikes!

According to Bloomberg, CoreWeave's $2.75 billion bond issued this April with a 9.75% coupon traded at 81 cents on the dollar on Wednesday, with yields surpassing 15%. Both the unsecured bonds due in 2031 and 2032 have dropped below 80 cents—a level widely seen in the market as the threshold for borrowers falling into financial distress. Analysts stated, “You can’t refinance at a 15% interest rate.”

According to Dow Jones market data, the cost of CoreWeave’s five-year credit default swaps soared to around 881 basis points on Monday, up sharply from 547 basis points at the end of June. Bloomberg cited this data, noting that it means the market-implied probability of default within five years is now above 50%.

Elon Musk reposted the relevant news on his social media platform, leaving only a single word, “yikes,” to express his shock.

AI Infrastructure Sector Under Pressure Across the Board, Rate Hike Expectations Ignite the Selloff

CoreWeave shares closed down about 15.46% that day, with the cumulative decline this month approaching a quarter. The selloff was not isolated. On the same day, Nebius fell approximately 15.1%, data center operators Applied Digital and IREN dropped around 8.8% and 9.9% respectively, Oracle down roughly 7.2%, while Dell and HPE fell about 10.3% and 6.4% respectively.

Barclays lowered its ratings for Dell and HPE from "overweight" to "neutral," stating: "Valuations have run far ahead, commodity costs once boosted revenue, but we have yet to see a meaningful AI inflection point."

The immediate trigger for the negative sentiment was inflation data. The consumer price index announced that day was higher than expected, raising market bets that the Federal Reserve will hike rates again this month. The 10-year US Treasury yield rose to about 5.19%, while the two-year yield jumped 7.2 basis points in a single day.

Kim Forrest, Chief Investment Officer at Bokeh Capital Partners, commented: "Investors are starting to question whether the large-scale buildout of AI infrastructure can actually deliver the returns previously expected."

CEO Issues Memo, Fulfilling Hundred-Billion-Dollar Orders Is Key

In the internal memo, Intrator wrote: “When you are building a new type of tech company, the market sometimes misunderstands and behaves irrationally. We are highly confident in our business model, customers, outstanding execution quality, and the rigorous discipline of the financial engine we have built.”

The company also disclosed that as of the second quarter, CoreWeave’s revenue backlog reached $104.2 billion, up from $99.4 billion in the first quarter; in the third quarter, it added more than $25 billion in net new customer commitments.

CoreWeave stated in a press release: “We are confident in our order backlog. It is sufficient to cover all of our debt obligations. We are confident about our financing status.”

However, Osterweis Capital Management bond portfolio manager Craig Manchuck told MarketWatch that CoreWeave is a "barometer of AI sentiment", and the bond selloff "shook the market a bit today", raising concerns that the company is borrowing too much too fast and may face the risk of being unable to continue financing to support its AI expansion plans.

Analyst: Borrowing at 9%, Earning 5%—the Larger the Scale, the Bigger the Losses

Gil Luria, Head of Technology Research at D.A. Davidson, directly pointed out the core issue during a Bloomberg TV interview.

They have already lost the ability to borrow at a 9% interest rate—this is a very worrying factor.

If CoreWeave borrows at a 9% cost but the best return available is just 5%, then scaling up further makes no sense: every step destroys value. This is especially pronounced for those new cloud service providers who rely entirely on debt financing to build data centers. The more leverage we use to build data centers, the more risk we inject into the system.

Luria had previously described CoreWeave as the "subprime mortgage tranche" of the AI sector. He noted that there was already a warning sign during CoreWeave’s borrowing activity in July—it eventually sold leveraged loans at a higher than expected rate, which, according to Bloomberg’s estimates, adds about $30 million more in annual interest expense.

CoreWeave co-founder Brannin McBee previously told the Financial Times that the company’s goal is to continuously obtain investment-grade ratings for its chip-collateralized debt and ultimately achieve an overall company rating upgrade so as to "access all the money in the insurance pools".

But Luria believes this investment-grade dream is crashing into reality.

The capital markets will self-correct; we’re not going to keep lending at these rates. The risk capital available for building data centers is limited, and hopefully this will help growth remain at a sustainable pace before 2030.

Credit Cracks Spread Outward, High-Yield Bond Market Rings Alarm Bells

Some bonds associated with CoreWeave also weakened, including bonds from Galaxy Digital Inc. and Core Scientific Inc.

S&P Global Ratings analysts wrote in a July rating report regarding Galaxy Digital’s bonds that a key assumption is that CoreWeave will be able to fulfill its lease obligations “for the foreseeable future,” but also noted, “Given its customer contracts are shorter-term than its lease commitments to Galaxy Digital, if AI service demand falls short of expectations and industry infrastructure supply overshoots demand, CoreWeave may face challenges in meeting these lease obligations.”

Edward Jones Senior Fixed-Income Analyst Brian Therien told MarketWatch: “Their ratings are higher, but they’re trading more like triple-C bonds.”

Hightower Advisors Chief Investment Strategist Stephanie Link noted that junk bond traders often “sniff out trouble before the equity market does,” saying the cracks are currently “largely confined to" the most vulnerable borrowers in the junk bond market, but added: “I am definitely keeping a close eye on it.”

Thrivent Chief Financial & Investment Officer David Royal warned: “Many of these companies borrowed on a relatively short-term basis, but you can’t refinance at 15%. This is how problems start.”

The State Street SPDR Bloomberg High Yield Bond ETF, which tracks the US high-yield bond market, as of Wednesday afternoon, has seen its total return since 2026 turn into a slight loss, falling by over 0.2%.

Although the bonds have fallen into distressed territory, CoreWeave stock has still risen more than 60% cumulatively since its IPO in March 2025, with a current market capitalization of about $36.5 billion.