Jakub Porzycki/NurPhoto via Getty ImagesA sudden burst of fear about CoreWeave's business has rattled the company's bonds and stock price.The stock plummeted after its bond yields surged to nearly 15% on Wednesday.A post from Chamath Palihapitiya drew attention to the surge in yields, to which Elon Musk replied, "Yikes"."Yikes."That's the message in the market on Wednesday swirling around CoreWeave, as the company, which leases high-end GPU compute to companies building AI tools, saw the yield on its 2032 bonds surge to almost 15% and prices tumbling into distressed territory.The "Yikes" came from none other than Elon Musk, who was responding to a chart posted on X by investor Chamath Palihapitiya showing the run-up in CoreWeave's bond yield. CoreWeave issued the bonds in June at 9.625%. Palihapitiya also included an analysis that theorized that AI is blowing up a private credit bubble.The stock plunged on the concerns around its debt position. Shares fell as much as 17% to $64.41. Meanwhile, credit default swaps, or the cost of insuring against a debt default, spiked.The yield surge indicates investors want to be paid more to hold the bonds, as they see risks for the company rising. CoreWeave has borrowed heavily this year, raising more than $30 billion in the debt markets and having more than $50 billion of debt outstanding as of the end of June.Even before Wednesday's sell-off picked up in earnest, bearish views about CoreWeave were percolating. D.A. Davidson's Gil Luria, a veteran tech analyst, speculated on a podcast that CoreWeave risks seeing its stock fall to zero if the AI spending boom wanes. The big risk, he said, is customers failing to renew their contracts with CoreWeave if the industry overbuilds.The company has been a major winner amid the scramble to build out AI data centers needed to run the suddenly ubiquitous technology. But there are debates within the industry and markets about whether risk is rising of a compute glut that could crush the profitability of infrastructure providers like CoreWeave. Peers in the space sold off in tandem on Wednesday, with Nebius Group down 11% and IREN Limited down 12%.Other troubles have cropped up elsewhere in the AI infrastructure space lately. Last week, Nvidia-backed data center operator Firmus pulled the plug on a planned IPO in Australia, as investors more heavily scrutinize valuations and sort winners and losers in the AI trade.Read the original article on Business Insider
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