Elon Musk Reacts to CoreWeave Bond Plunge with "Yikes"

Odaily News: AI cloud computing service provider CoreWeave's unsecured bonds maturing in 2032 fell below 80% of face value on Wednesday, with yields exceeding 15%, reaching levels typically seen as distressed debt. After Chamath Palihapitiya mentioned this yield on social media, Musk responded with "Yikes." CoreWeave's stock price fell as much as 17% on Wednesday, and its credit default swap (CDS) prices also rose to historic highs, reflecting that the market is pricing in a more than 50% probability of default over the next five years.

Analyst Gil Luria warned that CoreWeave relies on high-cost debt to expand its data centers, and if the AI financing boom cools, the company could face debt repayment pressure, with its stock price potentially even going to zero in extreme cases. If the company borrows at a 9% interest rate while its return on investment is only 5%, it could continue to destroy value even as its business scale continues to expand.