Fear that technology companies are borrowing too heavily for the AI build-out hit CoreWeave stock and debt at the same time on Wednesday.
By the numbers: CoreWeave shares fell 15.5%. The yield to maturity on its 9.625% bond due in 2032 sits at 14.8%, and its 9.75% bond due in 2031 is around 14.9%, with bond yields moving inversely to prices.
- Oracle closed down nearly 9%, Nebius dropped 10%, Dell fell roughly 11% and the Nasdaq Composite closed down 1.9%.
What they're saying: "When you are building a new type of technology company there will be periods of time when the market misunderstands and acts irrationally," chief executive Mike Intrator wrote in a memo obtained by CNBC.
Between the lines: Luis Alvarado of Wells Fargo Investment Institute said the era of easy money that ran through the first nine months of the year is starting to dissipate, and lenders now want more compensation for risk.
Zoom in: S&P rates CoreWeave B+, junk territory. The company "has capital expenditure levels that are almost hyperscaler-like, but it doesn't have the hyperscaler balance sheet," said Gavan Nolan of S&P Global Market Intelligence.
The other side: Paul Meeks of Freedom Capital Markets said the yields blew out on a concern he does not share, and he expects margins to improve once the data centers come online. CoreWeave reports results in November.
The backstory: Hyperscalers turned to the credit market to finance the build-out, pushing a surge of new bond supply into a market where rates were already climbing. Chamath Palihapitiya flagged the 15% yield on X, drawing a one word reply from Elon Musk: "yikes."
- TSMC, at the profitable end of the same spending, reported record quarterly net income of NT$763.1 billion the next morning, up 68.7% from a year earlier.
Why it matters: Credit is usually where an investment boom cracks first, and the market is now charging the AI borrowers hyperscaler-scale money at junk bond prices.
