CoreWeave and Nebius Report With Their Debt Under Scrutiny
Earnings from CoreWeave and Nebius this week will show whether debt-funded AI cloud builders can still raise money. Both stocks have lost about half their value in the past month.
The numbers behind the worry
CoreWeave reports on Tuesday and Nebius on Thursday. Both lean on debt to buy advanced AI systems, and both now face lenders who are less willing to extend credit.
Yields on some CoreWeave bonds maturing in 2031 rose above 16%. The spread on its five-year credit default swaps, a form of insurance against default, went above 1,240 basis points. That is up 50% in a month.
At the end of June, CoreWeave held $5.5 billion in cash against $35 billion in debt. It owed $1.3 billion at 15% on a facility due in March 2028. Another $3.2 billion sat on an August 2030 facility at 11%.
Why the pressure built
Last Thursday was especially bad. Neocloud shares dropped sharply, and the Nasdaq had its steepest slump in 19 months. Chipmakers Nvidia, Advanced Micro Devices and Micron slid too, amid worry about growing hostility to AI and what it means for data center projects.
The midterm elections added to it. Democrats won sweeping victories, and voters rejected data centers in all but one of 41 related ballot measures nationwide.
CoreWeave chief executive Mike Intrator tried to calm investors on LinkedIn. He wrote that the company does not expect the political shift to affect its existing customer commitments or backlog.
Nvidia, which has invested in CoreWeave, Nebius and other neoclouds, has a problem of its own at the top. CEO Jensen Huang admitted on Sunday to an affair with a business executive whom intelligence agencies describe as a Chinese spy.
What analysts want to hear
Luke Yang, a Morningstar analyst, does not expect CoreWeave to go bankrupt soon. He says the company can pay for the contracts it already has. Expansion over the next five years will need fresh capital, though, and a beaten-down share price makes selling equity hard. He wants to hear how management plans to "close this financing gap".
Paul Meeks of Freedom Capital Markets described the situation as a "doom cycle". Worried creditors push borrowing costs up, which makes funding the next build more expensive. He expects the market to get "some relief" from both reports.
For the latest quarter, analysts expect CoreWeave's revenue to grow about 160% from a year earlier, to $3.55 billion, according to LSEG. For Nebius, the forecast is sixfold growth to about $908 million.
IREN, a smaller listed neocloud, reported on Thursday that about 48% of its backlog is tied to Microsoft. Its AI cloud revenue more than doubled from the prior period, and its stock rose 20% on Friday. Its co-CEO Daniel Roberts said capital markets have grown more selective in recent weeks. Questions have moved, he said, from how big a contract is to whether the work can be delivered, paid for and made profitable.
The IPO pipeline stalls
The chill reaches companies that want to list. Nscale, based in the U.K., filed for an IPO in September but has not published an updated prospectus. Yang said he would not call this a good time for it to go public. SB Energy, which also filed in early September, is stuck in the same spot. Australia's Firmus dropped its IPO plans last month.
Source: CNBC