CoreWeave bonds and stock plunge as AI credit concerns rattle investors

Oct 14, 10:52 PM2 min readCovered by 3 outlets

Drafted by AI from the sources below, fact-checked by the Ajako Taja Editorial Team · How we use AI

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CoreWeave stock and bonds tumbled Wednesday as traders bought bearish 'bubble puts' amid rising fears of credit-market stress in the AI sector.

CoreWeave stock dropped 15% and its bond yields hit new highs on Wednesday, sparking fears of broader credit-market stress in the artificial intelligence sector.

The downturn in CoreWeave, a neocloud company offering GPU access, has intensified scrutiny of high-yield bonds tied to AI technology. International reported that the company's bonds reached a 15% yield, a development Social Capital founder Chamath Palihapitiya highlighted on X as a potential private credit bubble. Elon Musk responded to the post with the word "yikes," as reported by the same outlet.

Traders are increasingly betting against the Nvidia-backed firm, with put options volume surging to more than seven times the 30-day average. International noted one standout trade where an investor spent $1.9 million on bearish contracts that require the stock to fall another 42% to pay off. Scott Bauer of Prosper Trading Academy described these as "bubble puts," suggesting they may be a hedge for investors exposed to the Nasdaq or correlated AI stocks.

The sell-off affected other companies involved in data center expansion, with Nebius Group and Iren seeing declines of as much as 10%. International reported that while call options were active for these firms, data from Cboe LiveVol indicated that many of those trades were likely initiated by sellers. Feeds added that borrowing linked to artificial intelligence is coming under increased pressure as signs of stress rise in the junk bond market.

Investor sentiment was further pressured by a Financial Times report suggesting CoreWeave is looking to insurance companies for further debt financing. Meanwhile, International homepage reported that major chip and technology stocks including Nvidia and Oracle also slid on Wednesday as concerns over inflation and debt levels began to cool the fervor surrounding AI technology.

Background

Neocloud companies like CoreWeave provide the computing power necessary for artificial intelligence by offering access to specialized GPUs as a service, often utilizing significant debt to build out the required data center infrastructure.