On Wednesday, CoreWeave's shares plummeted by 16%, while its bond yields surged, with the yield to maturity on its 9.625% bond due in 2032 reaching 14.8% and the 9.75% bond due in 2031 at approximately 14.9%. This shift in investor sentiment, as noted by Luis Alvarado from Wells Fargo Investment Institute, indicates a growing demand for risk compensation as the era of easy money fades.
The concerns are not isolated to CoreWeave; other tech companies like Oracle saw their shares drop nearly 7%, and yields on its bonds also increased, with the yield on its 6.25% bond due in November 2032 at 7.24%. The overall tech sector was negatively impacted, contributing to a 1.4% decline in the Nasdaq Composite.
The rising debt levels among companies racing to build AI infrastructure have led to increased supply in the credit market, with JPMorgan estimating hyperscalers' spending to reach $800 billion this year and exceed $1 trillion annually by 2027. This trend raises questions about the sustainability of such borrowing and its implications for the tech sector's future