The rout is part of a broader global selloff in AI stocks and debt triggered by hotter-than-expected US inflation that lifted the 10-year Treasury yield to about 5.2% and raised the odds of further Federal Reserve rate hikes. Default insurance costs also climbed to highs for Oracle, whose five-year CDS spread reached 288 basis points, as well as Nvidia, Amazon, Alphabet and Meta, as investors questioned whether data center and chip spending will generate enough profit to service the industry's debt. Gartner added to the pressure by forecasting that cost pressures and a lack of differentiation will force more than 80% of neocloud providers to cease independent operations by 2030.
CoreWeave carries about $52 billion in debt and leases and paid $640 million in second-quarter net interest expense against a $626 million net loss and $2.58 billion in revenue. In an email to staff on Wednesday, CEO Michael Intrator said "there will be periods of time when the market misunderstands and acts irrationally," adding that the company's $104 billion backlog and more than $25 billion in early third-quarter commitments more than cover its debt obligations. To reduce borrowing costs, co-founder Brannin McBee told the Financial Times that CoreWeave wants more of its chip-backed loans rated investment grade to tap insurers' "unlimited" capital.