CoreWeave's polarizing stock rebounds as Wall Street squares off about AI spending

By Hannah Pedone

The company's shares see a dramatic reversal on Thursday

CoreWeave's stock rebounded Thursday.

Wall Street's views on CoreWeave are starkly divisive as investors pay more attention to the financial details of big artificial-intelligence companies and a potentially more challenging outlook for those that rely on borrowed money to drive growth.

To some analysts, CoreWeave (CRWV) is emblematic of a debt-fueled AI build-out that remains at full force despite uncertainty about the returns associated with all that spending. Those who are more upbeat about CoreWeave's prospects see a company that sits on a backlog of contracted business from high-quality customers, and one which has been unfairly punished by investors.

The skeptics had been winning out in recent days, driving particular pressure on the company's bonds. The $2.75 billion of 9.75% bonds that the company issued in April was trading at 79.5 cents on the dollar on Thursday to yield more than 15%, according to data provided by BondCliQ.

CoreWeave's stock, meanwhile, had lost 16% on the week heading into Thursday's session. But while the shares opened in the red and traded down as much as 9.5% earlier in the day, they managed to erase those losses and closed up nearly 6%.

"As equity analysts, it's possible we could be missing something technical on the credit side, but if this is purely about broader AI financing concerns, we'd argue CoreWeave continues to scale rather responsibly," wrote Deutsche Bank's Brad Zelnick in a Wednesday note.

He also pointed out that the company has close customer partnerships with Nvidia (NVDA) that can provide "different financing options as market conditions evolve."

CoreWeave has built a business model around renting out Nvidia's graphics processing units and supplying AI labs like OpenAI and Big Tech companies like Meta Platforms (META) with computing power. The company operates data centers across the U.S. and globally.

CoreWeave relies heavily on debt to fund its infrastructure purchases, Bernstein analyst Madison Rezaei explained in a Thursday note. That debt is coming into focus in an environment where investors are getting more worried about the costs of borrowing money and the sustainability of AI spending going forward.

Rezaei, who is cautious on CoreWeave's stock, said the company has a "wildly capital-intensive business," meaning that it needs to spend money to drive growth.

"The GPUs are spendy, the cash goes out well before the customer payments come in, and rapid growth compounds the funding gap," she wrote. Rezaei pointed to the fact that in the June quarter, CoreWeave generated $679 million in operating cash flow - the cash the company generated from its business activities - while also recording $9.4 billion of capital spending.

Tech companies have been flooding the market with both investment-grade and high-yield bonds to fund AI spending. But the cost of protecting CoreWeave's debt against default for five years increased to almost 881 basis points on Monday, up from around 547 basis points at the end of June, according to Dow Jones Market Data. That's based on credit-default swaps - derivative contracts that investors buy to hedge against against default risk. They become more expensive when investors believe the likelihood of default is rising.

A major concern for CoreWeave is that it heavily relies on credit guarantees from customers, Seaport analyst Jay Goldberg wrote in a Thursday note. He also said lengthy construction schedules could hinder the company's ability to hit some of its benchmarks, like deploying over 3 gigawatts of power by the end of 2027.

Goldberg wrote that the AI trade is becoming increasingly fragile, reflecting worries about OpenAI and Anthropic's financing and their potential to generate real returns. That, along with its bond yields hitting 15%, are driving a "delayed recognition" of CoreWeave's debt challenges, he said.

On top of that, CoreWeave CFO Nitin Agrawal disclosed in a Wednesday filing his recent sale of about $1.8 million worth of the company's shares at prices near $80. The sales were conducted on Monday via a Rule 10b5-1 trading plan, which is a program that allows corporate insiders to arrange for preset sales based on certain conditions. CoreWeave shares were trading Thursday morning at around $64.

CoreWeave did not immediately respond to a request for comment on Thursday, though a company spokesperson told MarketWatch on Wednesday that it is confident that its revenue backlog "supports all of our debt obligations." That revenue backlog - or contracted, unrealized revenue - reached roughly $104 billion at the end of the June quarter, which gives the company "substantial visibility into future revenue," the spokesperson said.

Analysts at Citrini Research wrote in a Thursday note that while "it's possible CoreWeave could go belly-up, there's an opportunity in the debt" - pointing out that the company has a market capitalization of $36.3 billion while its debt stands at $36.6 billion. That means bondholders would be repaid in full if CoreWeave lost roughly half its value, since debt holders get paid before equity holders, the Citrini analysts noted.

Given the bonds' 15% yield, "it's either going to be a great investment or the entire AI complex is at risk of a rug-pull," they wrote.

See also: The murky AI milestone that has some of the industry's leading voices increasingly on edge

-Hannah Pedone

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10-15-26 1703ET