CoreWeave faces a ‘doom cycle’ as credit risk clouds growth

After a tumultuous month for NeoCloud, which saw its share price halve, investors are eager to see how the sector’s biggest player plans to navigate tight credit markets and an unfavorable political environment.

coreweave The company is scheduled to release its quarterly results on Tuesday, followed by Nevius on Thursday. Both companies rely on debt to finance the purchase of cutting-edge artificial intelligence systems, but face skeptical lenders as AI deals sour on Wall Street.

NeoCloud had a particularly rough day last Thursday, suffering a dramatic decline and contributing to the Nasdaq’s steepest decline in 19 months. major chip manufacturer Nvidia, advanced micro device and micron Stocks also plunged on concerns that rising anti-AI sentiment would further complicate expansion plans.

Nvidia, a major investor in many neoclouds including CoreWeave and Nebius, is facing new turmoil after CEO Jensen Huang admitted Sunday that he had an affair with a company executive who intelligence agencies say was a Chinese spy. This news could add further volatility to an already nervous market.

Last week, Democrats won gubernatorial races in Georgia, Iowa, Nevada, Ohio, and Texas, and voters rejected data centers in all but one of the 41 related measures on ballots across the country.

CoreWeave CEO Mike Intrator attempted to allay investor concerns on LinkedIn.

“We do not currently anticipate any impact to CoreWeave’s existing customer commitments or related backlog as a result of changes in the political climate,” Intrater wrote.

But the market was unforgiving. Yields on some Coreweave bonds due in 2031 exceeded 16%. Spreads on five-year credit default swaps, which provide insurance against default, are more than 1,240 basis points (bp), up 50% in the last month.

“I completely agree that neocloud in particular is going to be hit the hardest,” Anastasia Amoroso, chief investment strategist at Partners Group, told CNBC’s “Closing Bell” on Friday. Unlike hyperscalers Amazon and microsoftthe top neoclouds are less profitable and highly dependent on a small number of customers.

AirenNeocloud, a small, publicly traded company, said in an earnings call late Thursday that about 48% of its backlog is related to Microsoft. However, the company reported that AI cloud revenue more than doubled sequentially, providing some relief to the market. IREN stock rose 20% on Friday, reversing losses from Thursday.

“There’s a disconnect between what we’re seeing in the public markets and what we’re seeing at the customer level,” IREN co-CEO Daniel Roberts told CNBC, but acknowledged the challenges posed by financial markets.

“The capital markets have become more selective in recent weeks, and the question has certainly shifted from contract size to delivery, financing and whether we can operate profitably,” Roberts said on an earnings call. His company currently has $10 billion in debt.

At the end of June, CoreWeave had $5.5 billion in cash and $35 billion in debt. According to its most recent financial report, the company had $1.3 billion in debt at 15% interest on a facility maturing in March 2028 and $3.2 billion at 11% interest on a facility due in August 2030.

Luke Yang, a Morningstar analyst covering Coreweave, said Coreweave is unlikely to go bankrupt in the near future and has the cash to fulfill existing contracts, but will need more capital for growth over the next five years.

“Even if they want to issue funds through equity, the stock price is not working in their favor because the stock price is going down,” Yang said. “So I would also like to know how management is talking about how to close this funding gap.”

Yang said he is also keeping an eye on the broader neocloud market.

UK-based Nscale filed IPO papers in September but has not released an updated prospectus since then. “I can’t say it’s a good time for them to go public,” Yang said.

SB Energy, which filed in early September, is in a similar predicament, and Australian neo-cloud company Farmus called off its IPO plans last month.

In an October memo seen by CNBC, Intrater told employees that uncertainty was not helping CoreWeave’s case.

“However, these companies are attempting to raise significant amounts of capital without the execution, revenue, scale, or software solutions that CoreWeave provides to its customers,” he wrote.

Investors are still watching. Paul Meeks, head of technology research at Freedom Capital Markets, said Thursday on CNBC’s “Power Lunch” that the report was “absolutely negative.”

“Unfortunately, this is a self-fulfilling prophecy and a destructive cycle. If creditors are worried about CoreWeave repaying its debt, it stands to reason that it will continue to have to borrow money at exorbitant interest rates to fund its AI infrastructure,” he said.

CoreWeave generated $5 billion in revenue in 2025. Meeks estimates that number will jump to $42 billion in 2028, with an EBITDA (earnings before interest, taxes, depreciation and amortization) margin of nearly 70% that year.

“If they can go down that path and people are happy with that path, they will feel more comfortable about the debt and CoreWeave’s financial wherewithal to pay those debts.”

Analysts expect sales for the most recent quarter to rise about 160% from a year ago to $3.55 billion, according to LSEG. Nebius is expected to grow six times to approximately $908 million.

Meeks said both earnings reports should provide “some reassurance” to the market.

Coreweave declined to comment. Nevius did not respond to requests for comment.

The key for Meeks is to get the capital markets back on board with NeoCloud’s growth story and believe that profits are on the horizon.

“You can have a healthy bank, but generally speaking if a run happens, the bank could be in some trouble,” he said. “So I’m not stupid enough to discount credit risk.”

WATCH: Partners Group’s Amoroso: Market doubts whether data center deals will continue