(Bloomberg) — CoreWeave Inc. has become ground zero in a tug-of-war between investors who see rising bond yields as a potential killer for the AI business and those who think demand for computing power will make those worries disappear before long.
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Shares of the cloud computing services provider plunged 20% in the first three sessions of the week, including more than 15% on Wednesday, as its debt fell to levels that typically indicate distress. On Thursday morning, the cost of protecting CoreWeave bonds from default reached the highest intraday level on record, while swaps priced a probability of default of more than 60% over the next five years.
But by Thursday afternoon, the sense of panic appeared to be easing as the stock rebounded into the green with Jensen Huang, chief executive of Nvidia Corp., a shareholder and supplier to CoreWeave, expressing confidence in the company. Additionally, Deutsche Bank called the sale a “buying opportunity.” Shares ended the day up 5.9%, their best performance in more than a month, although they gave up some of that rally in Friday’s premarket trading.
“The macroeconomic environment has created a market that is about selling first and asking questions later,” said Thomas DiFazio, exchange-traded fund strategist at Roundhill Financial. “In the short term, it’s hard to say without hesitation that the fire is there.”
As a neocloud provider, Coreweave is at the heart of building the infrastructure necessary for the development of artificial intelligence technology. The security of its debt is a key question for investors because its spending on building data centers is financed by issuing bonds. As Treasury yields rise and inflation remains stubbornly high, the cost of this financing is rising rapidly.
All of this has led to a bumpy ride for CoreWeave stock. The stock is up 74% since its troubled IPO in March 2025 which had to be supported by Nvidia. But it’s down 2.7% this year and 62% since peaking in June 2025, and it’s less than $30 from its original price.
However, the benefits of CoreWeave are quite clear, as demand for AI computing services continues to outstrip supply. And there are few signs that the dynamic will change anytime soon, DiFazio said.
That’s the view of Deutsche Bank analyst Brad Zelnick, who has a buy rating on the stock and urges investors to buy the shares before they fully rebound.
CoreWeave has “a strong customer base, an established track record of execution, backlog conversion and industry-leading infrastructure performance,” Zelnick wrote in a research note Thursday. “While more capital will be required, this can happen at a sustained pace and is supported by a strong customer order book.”
Of course, CoreWeave wasn’t alone in this week’s massive sale. The Philadelphia Stock Exchange’s semiconductor index, known by its symbol SOX, fell 7.9%, a 21% decline from its June peak. Server makers Dell Technologies Inc. and Hewlett Packard Enterprise Co. fell about 20%.
But CoreWeave is considered one of the riskiest stocks in the AI sector due to its heavy reliance on high-yield debt to finance its data centers. The company’s goal is to continue achieving high ratings, co-founder Brannin McBee told the Financial Times on Wednesday, underscoring how CoreWeave plans to borrow more.
The company’s close relationship with Nvidia could be a source of capital if its market access tightens, according to Robert Schiffman, an analyst at Bloomberg Intelligence. But Huang opposed the idea on Thursday, saying a bailout was not necessary.
“CoreWeave’s strength is improving every day,” Huang told Bloomberg at an event in Stockholm. “I’m optimistic. Their cost of capital is coming down.”
Yet despite all the risks posed by rising interest rates and the stratospheric level of AI spending, the fundamental backdrop remains encouraging for CoreWeave, according to Matt Bartolini, global head of research strategists for State Street Investment Management.
“We are still very early in the AI investment cycle, so I don’t think rates will be a difficult barrier to overcome, but it does change the calculus behind the continued issuance of debt and ensures that financing of this debt can be ensured by credible growth in the future,” Bartolini said. “It’s secular demand that funds the investment cycle, and I think demand is likely to continue regardless of what rates move.”
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–With help from Subrat Patnaik and David Watkins.
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