AI Sell-Off Deepens as CoreWeave Debt Worries Spread Across Markets

The artificial intelligence sector is facing mounting pressure as investors question whether the companies building the infrastructure behind the AI boom can sustain their debt burdens and financing costs.

CoreWeave’s stock and bonds have come under pressure as investors question the debt and financing costs behind the AI infrastructure boom. [Photo: CoreWeave]

CoreWeave has become a focal point of the sell-off. Its shares fell sharply after concerns about its debt and bond-market performance intensified, and the stock remained under pressure the following day, according to Barron’s reporter Callum Keown.

The company’s bond prices also weakened, pushing yields higher and signaling that investors were demanding greater compensation for the perceived risks associated with its debt.

The concerns extend beyond CoreWeave. Investors are reassessing the financing needs of data-center operators and other businesses whose growth depends on continued investment in expensive computing infrastructure.

Reports about Anthropic’s financial performance added to the uncertainty.

Investors have focused on whether revenue growth will be sufficient to justify the industry’s enormous capital commitments and whether companies can continue raising funds at current borrowing costs.

Semiconductor stocks have also suffered. The iShares Semiconductor ETF was heading toward an eighth consecutive daily decline, which would represent its longest losing streak in more than a decade if confirmed at the close.

The sell-off continued despite strong earnings from Taiwan Semiconductor Manufacturing Co. (TSMC), one of the world’s largest contract chipmakers.

The company’s results did little to reassure investors worried about valuations, financing and the long-term returns on AI investment.

At the same time, US Treasury and other government bond prices rallied, pushing yields lower as investors sought safer assets.

That response suggested that concerns about the technology sell-off and credit-market risks were, at least temporarily, outweighing the inflation concerns that had previously pushed yields higher.

The movement in stocks and bonds underscores the importance of financing conditions to the AI investment cycle.

If borrowing costs remain elevated or revenue growth disappoints, companies with substantial infrastructure spending and debt obligations could face additional pressure.