Wall Street continues to pay for companies buying AI computing power. It’s getting rid of those who borrowed billions to rent it.
Think of neoclouds as the owners of AI. They go into heavy debt to buy Nvidia (NVDA) chips, then rent the computing power to companies developing AI. This is working well while money is cheap and tenants continue to sign leases. It gets risky when lenders start asking questions.
They are asking now. A Yahoo Finance basket of eight neoclouds has lost more than 40% since the end of July. Microsoft (MSFT), one of the biggest lessors of AI computing power, gained almost as much.
CoreWeave (CRWV), the largest of the group, closed Friday at its lowest level since May 2025, then slipped to around $51 early Monday before buyers stepped in. IREN (IREN), Core Scientific (CORZ) and Cipher Mining (CIFR) closed Friday at their lowest levels in more than a year, and Galaxy Digital (GLXY) hit a record high for its U.S. listing.
The bond market sends the same message
Investors can take out insurance against a company that defaults, called a credit default swap. For CoreWeave, this insurance now costs more than twice as much as it did at the beginning of June, according to Bloomberg data.
At current prices, the market is effectively betting on odds greater than 100,000 that CoreWeave will default within five years, according to Yahoo Finance calculations. That’s double the odds from a year ago. This is a price that causes a lot of fear, not a forecast.
Last week, CoreWeave flirted with a bear trap – a decline that comes back and burns traders betting on more losses. The rebound did not hold and the cost of insuring its debt continued to climb.
Nebius (NBIS) is the exception. It is at its lowest since July only and remains on the rise this year. It has less debt than CoreWeave and investors sort the group by balance sheet.
The money hasn’t dried up – it’s become difficult
Elon Musk put it bluntly on Sunday on X: Lenders have “almost completely closed off access to money” to companies that rely on AI data centers for revenue. SpaceX (SPCX), with its Starlink and launch activities, just borrowed $40 billion for AI chips.
Musk is not a neutral observer. SpaceX (SPCX), which absorbed its AI startup xAI in February, now leases its own data centers to AI developers including Anthropic and Google. Each neocloud that cannot raise funds is one less rival for these customers. And during an upheaval, the buyer with the strongest balance sheet usually gets the best deals.
Big money managers on Wall Street see the same divergence. In a BofA Global Research survey, fund managers who buy convertible bonds (a hybrid of equity and debt that AI companies have used to raise cash) named the AI bubble as their top near-term concern. They’re shifting to the safest borrowers, even though most don’t expect AI spending to slow down for at least a year.
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