CoreWeave's debt crisis sparks AI stock selloff as bond prices collapse

CoreWeave, a leading AI cloud provider, saw its stock plunge 15% on October 14 as bond prices collapsed and credit default swap (CDS) costs surged, signaling market fears of a liquidity crisis in the highly leveraged AI computing sector. The selloff also hit peers Nebius and IREN, wiping out significant market value. The turmoil originated in debt markets, where CoreWeave's 2032 bonds fell below 80% of face value, pushing yields above 15%—a distress threshold. CDS pricing implied a 60% default probability over five years. The company carries nearly $50 billion in debt, relying on high-yield bonds to fund GPU purchases and data centers, with revenue heavily concentrated among three clients. Analysts highlight structural vulnerabilities: capital expenditures far exceed operating cash flow, refinancing costs are rising with interest rates, and GPU depreciation erodes profitability. While bears warn of a systemic AI financing bubble, bulls argue risks are isolated to high-leverage newcomers, contrasting them with traditional cloud giants like Microsoft and Google that fund capex from internal cash flows.