CoreWeave stock wipeout exposes divide between AI fear and greed

Skip to Content News Archives Economy Defence Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Defence Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Defence Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeInvestorCoreWeave stock wipeout exposes divide between AI fear and greedThe cloud-computing services provider’s shares plunged 20% in the first three sessions of the weekAuthor of the article:Jeran Wittenstein and Ryan VlastelicaCoreWeave Inc. signage in Times Square in New York, U.S., on May 9, 2025. Photo by Yuki Iwamura/BloombergCoreWeave Inc. has become ground zero in a tug of war between investors who see rising bond yields as a potential rally killer for the AI trade and those who think demand for computing power will make those concerns seem passe before long.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe cloud-computing services provider’s shares plunged 20 per cent in the first three sessions of the week, including more than 15 per cent on Wednesday, as its debt tumbled to levels that typically indicate distress. On Thursday morning, the cost of protecting CoreWeave bonds against default rose to the highest intraday level on record, while swaps priced in a more than 60 per cent chance of a default within the next five years.This advertisement has not loaded yet, but your article continues below.But by Thursday afternoon, the sense of panic appeared to be alleviating as the stock bounced into the green with Jensen Huang, chief executive of Nvidia Corp., which is a CoreWeave shareholder and supplier, expressing confidence in the company. In addition, Deutsche Bank called the selloff a “buying opportunity.” The shares ended the day up 5.9 per cent, their best performance in over a month, though they gave up some of that recovery in Friday’s premarket trading.Canada's best source for investing news, analysis and insight.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Investor will soon be in your inbox.We encountered an issue signing you up. Please try again“The macro backdrop has created a sell-first, ask-questions-later market,” said Thomas DiFazio, exchange-traded fund strategist at Roundhill Financial. “In the short run, it is hard to say with a straight face that the all-clear is here.”As a so-called neocloud provider, Coreweave is at the heart of the infrastructure buildout needed to develop artificial intelligence technology. The safety of its debt is a key issue for investors because its spending on building data centres is being funded by issuing bonds. With Treasury yields climbing and inflation remaining stubbornly high, the cost of that financing is rising fast.This advertisement has not loaded yet, but your article continues below.All of which has led to a bumpy ride for CoreWeave shares. The stock is up 74 per cent since its troubled initial public offering in March 2025 that had to be backstopped by Nvidia. But it’s down 2.7 per cent this year and 62 per cent since hitting a peak in June 2025, and it’s less than US$30 from its debut price.However, the upside for CoreWeave is pretty obvious, as demand for AI computing services continues to outstrip supply. And there are few signs that dynamic is going to change any time soon, DiFazio said.That was the view taken by Deutsche Bank analyst Brad Zelnick, who has a buy rating on the stock and is urging investors to snap up the shares before they fully rebound.CoreWeave has “a strong customer base, established record of execution, backlog conversion and leading infrastructure performance,” Zelnick wrote in a research note on Thursday. “While more capital will be needed, this can happen at a steady pace and is backed by robust customer backlog.”Of course, CoreWeave wasn’t alone in this week’s selloff. The Philadelphia Stock Exchange Semiconductor Index, known by its ticker SOX, has dropped 7.9 per cent, leaving it down 21 per cent from a June peak. Server makers Dell Technologies Inc. and Hewlett Packard Enterprise Co. have fallen about 20 per cent.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.But CoreWeave is considered one of the riskiest stocks in the AI trade because of its heavy reliance on high-yield debt to finance its data centres. The company’s goal is to keep winning high-grade ratings, co-founder Brannin McBee told the Financial Times on Wednesday, which just underscores how much more CoreWeave plans to borrow.The company’s close relationship with Nvidia could provide a source of capital if its market access tightens, according to Bloomberg Intelligence analyst Robert Schiffman. But Huang pushed back against that idea on Thursday, saying there’s no need for a bailout.“CoreWeave’s strength is improving every day,” Huang told Bloomberg at an event in Stockholm. “I’m optimistic. Their cost of capital is actually decreasing.”Still, even with all the risks posed by higher interest rates and the stratospheric level of AI spending, the fundamental backdrop remains encouraging for CoreWeave, according to Matt Bartolini, global head of research strategists for State Street Investment Management.This advertisement has not loaded yet, but your article continues below.“We’re still very early on in the AI capex cycle, so I don’t think rates will be the barrier that’s hard to jump over, but it does change the calculus behind the continued issuance of debt, and ensuring whether the financing of that debt can be met with credible growth in the future,” Bartolini said. “The secular demand story is what’s funding the capex cycle, and I think demand is likely to continue irrespective of what’s happening with rates.”Top tech storiesTaiwan is preparing to tighten export controls on AI chips to further align with U.S. restrictions, according to a senior official in Taipei, joining a Trump administration clampdown on the smuggling of cutting-edge semiconductors to China.Tesla Inc. unveiled its long-delayed new Roadster sports car Thursday in Texas, reviving and refreshing a model that it stopped producing more than a decade ago.Netflix Inc. is replacing its chief creative with a veteran TV and film executive, Peter Rice, accelerating efforts to reinvigorate growth and reverse a slowdown in viewers and revenue at the streaming giant.Meta Platforms Inc. made one of its new artificial intelligence models available for developers to download and modify, while keeping its most advanced technology closed in an effort to convert its AI investments into revenue.With assistance from Subrat Patnaik and David WatkinsThis advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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