CoreWeave and Iren face high debt risks.
The author suspended their buy call.
They advise watching until AI downturn survival is proven.
What happened
The author suspended their earlier call that CoreWeave and Iren could deliver outsized AI-driven gains, citing high debt levels and a Shiller P/E ratio at 42, near all-time highs.
Why it matters
CoreWeave holds over $35 billion in total debt, up from $21 billion in six months, and Iren has $3.7 billion in notes payable, raising concerns they may struggle to service loans if AI demand dips, as seen with Nortel and Lucent during the dot-com bust.
What to watch
The author recommends keeping both stocks on a watch list until they prove they can survive a meaningful AI downturn, noting that if they recover, they could still create millionaires.
Ask the AI about this article →
The author's shift reflects a cautionary view on debt-fueled AI infrastructure plays. CoreWeave's debt ballooned from $21 billion to over $35 billion in six months, far exceeding its $5 billion equity. Iren, while less indebted, still faces strain with $3.7 billion in notes payable against $2.7 billion equity. The historical parallel to dot-com era financing practices, where Nortel and Lucent collapsed, underscores the risk. The author suggests these companies must prove they can weather an AI downturn before investors buy aggressively. Given the high Shiller P/E, the broader market's valuation also signals potential volatility.
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