Core Weave Bonds Tumble Into Distress, Drawing ‘Yikes’ From Musk Rachel Graf and Katherine Schwartz Core Weave Inc.’s bonds have plunged to levels that typically indicate distress, in a swift move that has caught the attention of Silicon Valley leaders including Chamath Palihapitiya and Elon Musk. The AI cloud-computing provider’s unsecured debt due in 2032 traded below 80 cents on the dollar on Wednesday, according to Trace pricing data. That’s widely considered the threshold for when a borrower is financially strained.
At that price, the bonds yield more than 15% — a figure noted by Palihapitiya that led Musk to respond “yikes” on his social media platform. The company’s shares, which fell as much as 16% on Wednesday, are also attracting warnings. D.
A. Davidson analyst Gil Luria, who has referred to Core Weave as “the subprime tranche” of AI, warned on a podcast that the stock could go to zero if the AI funding boom falters and the company becomes unable to pay its expensive debt obligations. Livingston, New Jersey-based Core Weave is considered the original “neocloud” — a batch of cloud-computing providers focused on the booming artificial-intelligence market.
Its business is capital-intensive, and the company is heavily reliant on the high-yield debt markets to fund its buildout. In recent months, Core Weave has had to pay higher borrowing costs to clinch that financing. Core Weave’s credit-default swaps are back at a record high, and at current levels are pricing in a more than 50% chance of default within the next five years.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing