CoreWeave bond rout tests market's math on AI buildout
CRWV•CoreWeave bonds issued in June at a 9.675% yield fell in value, pushing their yield to 15% this week. Investors said the selloff is prompting greater scrutiny of debt-funded AI infrastructure projects that may take years to generate revenue.
1. Bond yields jump
CoreWeave bonds issued in June at a yield of 9.675% have plunged in value, sending their yield to 15% this week. Investors and analysts said the debt selloff may signal a broader reassessment of the risks of financing AI projects that could take years to generate revenue.
2. Investors reassess risk
Credit investors said they are becoming more selective about AI infrastructure exposures, particularly where risks are concentrated. F/m Investments portfolio manager John Han said the firm holds unsecured CoreWeave bonds in an ETF because they are part of its tracked index, but that the bonds at current yields “certainly deserve another look.”
3. Buildout faces headwinds
Investors cited rising financing costs, large funding needs, leverage and the possibility that GPUs could become obsolete before data centers open. Dan Ives estimated that 5% to 10% of planned projects ultimately will not be built, while citing data center permitting and political rhetoric around power prices as reasons for investor concern.
