CoreWeave shares fall 15% as CEO says backlog covers debt; sell-off extends

Centre · 1Shares of AI cloud-computing provider CoreWeave closed down around 15% on Wednesday 14 October, and fell a further 6% in premarket trading on Thursday. 1 2 Centre · 1CEO Mike Intrator told employees in a memo, seen by Reuters and first reported by Bloomberg News, that the company's deal backlog is large enough to more than support its debt obligations and that the market can sometimes "misunderstand and act irrationally". 1 2 Centre · 1Intrator wrote that difficulties and delays in the attempted IPOs and debt financings of some CoreWeave rivals "are bleeding into the narrative around CoreWeave". 1

Centre · 1CoreWeave reported a revenue backlog of $104.2 billion in the second quarter, up from $99.4 billion in the first, and said it had secured more than $25 billion of net new customer commitments in the third quarter. 1 Centre · 1Its bonds have fallen sharply. According to Bloomberg, unsecured debt due in 2032 traded below 80 cents on the dollar on Wednesday. On Thursday, Reuters-sourced CNA copy said the yield on April-issued bonds due 2031 passed 16%, above the level that typically signals distress, and Elon Musk responded with "yikes" on social media. 1 2 Centre · 1Loss-making CoreWeave has around $50 billion in debt, and the cost of insuring it against default has climbed to around 1,000 basis points, which implies a nearly 63% chance of default within five years, up from about 30% a year earlier. 2

Centre · 1The drop came amid a wider tech sell-off. The Philadelphia Semiconductor Index has lost over $1.6 trillion in value in an 11.6% slide over six sessions, and rival neoclouds Nebius, Applied Digital and Iren fell between 3.2% and 5%. 2 Centre · 2Research firm Gartner added to the pressure by forecasting that most neoclouds could disappear by 2030. CNA says about 80% could shut down and that more than $3.5 trillion of AI infrastructure spending could face impairment. Hindustan Times says more than 80% could lose their independence by shutting down, merging or otherwise. 2 3 Centre · 1Bernstein analyst Madison Rezaei maintained an "Underperform" rating, saying the company's long-term business model still faces economic challenges, according to Hindustan Times citing Yahoo Finance. 3

Centre · 2In a statement to Yahoo Finance, CoreWeave said some competitors are trying to raise large sums without its execution capabilities, revenue, scale or software, and that it remains confident in its business model, customers and execution. Co-founder Brannin McBee told the Financial Times the company is seeking an investment-grade rating that would open the door to "unlimited" capital. 3 2 Centre · 1Analysts expect CoreWeave to post revenue of nearly $13 billion this year and a loss of $2.13 billion. In August it raised its annual capital spending forecast by $4 billion to $35-39 billion. Critics say borrowing-funded neoclouds are exposed to any cooling in AI demand, and that their chips lose value as newer generations arrive. 2