Cloud Computing Shares Sink Again. Nebius, Hut 8 Down Nearly 9%; IREN Down over 8%; HPE Down 7%; CoreWeave Down over 6%

Dow Jones
10/15

CoreWeave and other cloud-computing stocks were falling on Thursday as fears about debt continued to ravage the artificial-intelligence sector. The pressure could be on for chip maker Nvidia to calm the market.

CoreWeave shares were down 6.61% at $61.44. That was adding to a 15% drop the previous day.

Other so-called neocloud stocks -- providers of additional AI computing power -- were also suffering. Nebius Group was down 8.93% and IREN was falling 8.46%, both adding to steep drops the previous day. Software company Oracle, which has expanded into cloud computing, was down 0.3%.

Shareholders were spooked by the yield on CoreWeave's 9.625% notes, due in 2032, touching 15% on Wednesday as their price in secondary markets sank. That doesn't mean CoreWeave is suddenly paying 15% interest on its debt -- just that investors are demanding more compensation for the credit risk.

Still, CoreWeave is generally viewed as a proxy for how risky the AI trade is as a whole due to its debt-funded rapid expansion. And with sentiment darkening, that could mean AI leader Nvidia is needed to lift the gloom.

"Nvidia needs to step up with financing backstops for CoreWeave & the broader neocloud ecosystem," wrote Michael Haber, senior vice president of High Yield Strategy at Jefferies, in a research note. "The survival & continued expansion of the neocloud ecosystem is critical to Nvidia's growth, as hyperscalers increasingly bring chip development in-house."

Nvidia and CoreWeave have a close relationship, with the former acting as supplier, customer and investor in the latter. As part of their existing agreements, Nvidia is obligated to purchase any unsold cloud-computing capacity through April 13, 2032, if CoreWeave's data centers aren't fully used by its own customers.

CoreWeave said Wednesday that its revenue backlog should more than support the payment for all of its debt obligations, without needing customers to renew their contracts or finding new tenants for the properties. The company noted that its revenue backlog reached approximately $104 billion at the end of second quarter, up 246% from a year ago and mostly from "committed, take-or-pay contracts."

As of June 30, CoreWeave's balance sheet debt was approximately $35.1 billion, before around $16.3 billion of operating lease liabilities.

CoreWeave is set to make capital expenditures of $260 billion in the period from 2027 through 2030 to reach its goal of eight gigawatts of data-center power capacity by the end of the decade, according to UBS analyst Karl Keirstead. He estimates that will require about $102 billion in additional financing.

Right now, CoreWeave would find it notably pricey to finance that planned expansion -- at least without some more explicit help from Nvidia.

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