CoreWeave shares, bonds headed for steep weekly losses as AI borrowing concerns mount

Oct 16 : CoreWeave's shares and bonds were headed for steep weekly losses on Friday, as investors grew uneasy about the debt financing behind the AI build-out in the face of rising borrowing costs.

The firm's shares dipped 4.1 per cent in premarket trading on Friday, after jumping 5.9 per cent in the last session.

Here are some details:

• As of last close, the shares were down more than 15 per cent this week, on course for their biggest weekly decline in about two months

• AI infrastructure stocks fell this week as hot inflation raised borrowing-cost worries

• "A hot inflation print triggered a sharp selloff in CoreWeave because its business model is a highly indebted play on future data center demand," BCA Research analysts said

• "Although the rest of the tech complex is also sensitive to the pace and magnitude of AI adoption and use, it is, on average, considerably less sensitive to interest rates"

• Shares of rival Nebius Group fell 1.5 per cent on Friday morning, also set for their steepest weekly fall in two months

• CoreWeave is a loss-making cloud company that has about $50 billion in debt

• The yield on CoreWeave's October 2031 maturity dollar bond briefly surged past 16 per cent on Thursday

• The bond is set to decline for a fifth straight week, down about 3 cents on the dollar this week

• Cost of insuring against CoreWeave's debt surged past 1,000 bps to record highs this week - S&P Global Market Intelligence data

• As of last close, CoreWeave shares were on track to erase a fifth of their value this month