CoreWeave bonds turn distressed as shares fall over 20%

CoreWeave's troubles come from a specific structure: it pioneered using GPUs as collateral for loans, and it has no real business beyond selling compute, a business on which it does not make money. The company owed more than $35 billion as of its second quarter earnings and lost more than a billion dollars in the first half of the year. That combination explains why a move in its bond yields carries weight beyond one company.

The offsetting factor is its contract book. CoreWeave reported $103.7 billion in remaining performance obligations as of the second quarter, about 40 percent of it due in 2028, and customers can't cancel except under very limited circumstances. Microsoft, OpenAI, and what is probably Nvidia generated almost three-quarters of second quarter revenue. Microsoft and Nvidia are probably good for the money as long as it benefits them, and OpenAI is shakier — but unless OpenAI is in significantly more distress than is widely realized, CoreWeave is probably fine for a while, and only when the AI boom falters will it be clear whether the business is viable.

The contagion has already shown up elsewhere. Oracle's shares have fallen almost 10 percent in the same timeframe, and there has been a sell-off in Oracle bonds. The anxieties around CoreWeave are present for all neoclouds — it is just not clear the bare-metal business is a good one.