No. of Recommendations: 7
reuters.com - Coreweave bond rout tests markets math AI buildoutA sharp decline in CoreWeave's (CRWV.O), opens new tab bonds this week is emerging as a test of investors' willingness to keep financing the massive buildout of AI infrastructure, as rising borrowing costs and scrutiny of debt-funded expansion hit the sector.
Analysts and portfolio managers said the selloff in the data center operator's debt carries more significance than a concurrent rout in its shares because it may signal a broader reassessment of the risks tied to financing AI projects that may take years to generate revenue.
CoreWeave bonds issued in June at a yield of 9.675% have plunged in value, sending their yield to 15% this week.
"CoreWeave is absolutely the canary in the coal mine" for a market segment that is coming under more stress, said Max Frumes, global head of distressed and leveraged finance at 9fin, a fintech corporate credit data and analytics company.
"This is going to be a turning point in the pricing and availability and structure of credit that's supporting the AI boom," said Frumes, who believes that other AI-linked debt will follow CoreWeave into distressed territory. "It's going to get more expensive. There will be a lot more scrutiny and probably some pushback from investors."
Jeff
