CoreWeave and Data Center Bonds Slide on Capex and Debt Concerns

Data center bonds hit fresh lows this week as Cipher Digital's new debt raise fueled investor anxiety over AI overspending, with CoreWeave's unsecured notes yields spiking to 15% and beyond amid concerns about its ability to service its massive debt load. CoreWeave's 9.75% senior 2031 bonds dropped to 78 on Oct. 14 for a 16.39% yield, while its $1.25 billion 9.625% 2032 bonds slumped to 75 for a 16.5% yield, before reclaiming levels of 83 and 80 respectively on Oct. 15. Applied Digital debt also suffered after JPMorgan cut its project finance bonds to Neutral, citing a looming supply overhang as the company may need to raise another $8 billion in secured project debt for construction costs tied to leases with hyperscalers including Meta. JPMorgan's concerns stem from Cipher Digital's plan for a private offering of $850 million in zero-coupon convertible senior notes due 2032, with an option for buyers to purchase up to an additional $150 million, alongside plans to exchange existing convertible notes for common stock. Equity investors drove Cipher stock to a six-month low on dilution fears, while Morgan Stanley trimmed its price target to $51.50 from $54.00. CleanSpark's recent $2.276 billion green notes offering also slipped 0.75 points to a 98.75 context as investors digested its shift to quarterly reporting amid its AI data center transition.