CoreWeave shares jumped more than 6% on Tuesday morning after the AI infrastructure company announced that most of its planned data-center capacity in Copenhagen was operational.
The news gave investors fresh hope that its expensive expansion is making progress. Yet serious financial concerns remain. Investors buying CoreWeave’s debt are demanding unusually high returns, reflecting fears about the company’s ability to repay what it owes.
Why Are Investors Worried About CoreWeave’s Debt?
CoreWeave rents powerful Nvidia chips to companies developing artificial intelligence. Building those data centers costs billions, much of it borrowed.
The financial pressure is growing. CoreWeave’s quarterly net interest expense reached $640 million between April and June, compared with $267 million a year earlier.
Its bonds tell an even more worrying story.
Bonds are effectively loans investors make to companies in exchange for interest payments. One $2.75 billion CoreWeave bond issue promises 9.75% annual interest until 2031.
However, its market price has fallen, pushing its potential annual yield as high as 15.76%. That means buyers could earn considerably more if CoreWeave repays everything as promised.
Such high yields suggest investors see substantial repayment risk.
Jim Cramer Challenges Nvidia to Put Its Money on the Line
The concerns prompted CNBC’s Jim Cramer to challenge Nvidia CEO Jensen Huang on Tuesday.
If Huang believes CoreWeave is financially sound, Cramer argued, Nvidia should buy its high-yielding bonds and take on some of that risk itself.
Huang had defended CoreWeave earlier this month.
“I’m optimistic. Their cost of capital is actually decreasing,” he told Bloomberg.
Nvidia already owns roughly 10% of CoreWeave and has a $6.3 billion agreement to purchase unused computing capacity through 2032.
Buying existing bonds would increase Nvidia’s exposure, although it would not directly provide fresh funding to CoreWeave.
CoreWeave Stock Price Forecast: How High Could It Go?
Despite the debt concerns, Wall Street analysts remain broadly optimistic.
According to TipRanks, 22 of 30 analysts recommend buying CoreWeave, with an average 12-month price target of $130.92.
That implies roughly 124% upside from Tuesday morning’s $58.54 price. However, forecasts range widely from $39 to $250, and several banks have recently lowered their targets.
For investors, the question is whether CoreWeave can generate enough cash from its growing AI business to manage the debt financing its expansion.
