Neocloud stocks like CoreWeave (CRWV) and Nebius (NBIS) are poised to close out a horrible week in their relatively short time on the public markets.
CoreWeave and Nebius shares are both down about 15% in the last five days alone.
Even though concerns about CoreWeave’s financial health are blamed on Neocloud’s stock routs, the reality is that this isn’t just a CoreWeave problem. The overall financial health of building the AI economic system is being examined more closely in a country with higher interest rates for longer.
Goldman Sachs explained the pressure quite well in a new note on Friday.
Spreads for AI-linked high-yield debt in U.S. dollars widened by 25 basis points between October 13 and 14, reaching a new high of 360 basis points against Treasuries. In contrast, non-AI debt spreads were only two basis points wider and remain lower than their March peak, Goldman Sachs pointed out (see charts below).
Among AI-related debt issuers, the broadening has focused on AI-related corporate bonds and financing of data center projects.
“While softer AI-related sentiment may expand data center bonds, particularly if there is a reassessment of buyers’ credit risk, we view AI-related corporate bonds, whether from neoclouds or companies with significant exposure to frontier labs, as being at the epicenter of the financing cost debate,” explained Goldman Sachs strategist Amanda Lynam. “The AI-adjacent energy and utilities sectors have been more resilient, in our view reflecting in part more diversified revenue streams and a relatively defensive earnings profile. We believe the broadening reflects a reassessment of the economics of AI development, particularly for lower-rated borrowers who are more exposed to higher rates for longer and potential energy cost pressures.
Lynam predicts “a near-term reversal” of the recent sell-off in AI-related US high-yield debt. But she acknowledges that “the dispersion between AI-related issuers is likely to remain high.”
64.08 -5.61 (-8.05%)
At 10:57:04 a.m. EDT. Open market.
CRWV NCIS
Brian Sozzi is the editor-in-chief of Yahoo Finance, host of the Sozzi unleashed the morning show and Power Actors with Brian Sozzi podcast and member of the Yahoo Finance editorial leadership team. Follow Sozzi on @BrianSozzi, InstagramAnd LinkedIn. Any advice on stories? Email brian.sozzi@yahoofinance.com.
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