CoreWeave's debt costs are surging as credit markets grow skittish about AI data center financing. The neocloud company's 2032 bond, which carries a 9.625% coupon, now trades at a yield above 16%. CoreWeave's five-year credit default swaps spiked above 1,289 basis points on Thursday, according to Deutsche Bank, signaling investor concerns about default risk.
Credit markets are pricing in political headwinds. Democratic governors in Ohio, Texas, and Georgia have signaled resistance to data center buildout. Texas governor-elect Gina Hinojosa wants a moratorium until the state legislature passes community protections. Goldman Sachs estimates that potential moratoriums could affect 45% of planned U.S. data center capacity.
Even major chipmakers and cloud companies face rising borrowing costs. Nvidia's credit default swaps rose 76% in the past month to roughly 139 basis points. Broadcom's CDS climbed 49%, and Amazon's rose 44%. These spreads remain low in absolute terms compared with CoreWeave's roughly 1,100 basis points, but the trend reflects broader market unease.
AI debt issuance remains robust. Goldman Sachs tallies five AI bond deals worth $67 billion since October 29, bringing total hyperscaler debt issuance this year to $296 billion. Goldman forecasts $440 billion in hyperscaler debt next year, plus an additional $300 billion in project-level issuance.
Jefferies' Christopher Wood warned that "the most plausible way the AI capex arms race will end is that the credit card will be taken away." Bank of America predicts AI-related credit issuance will peak around 2027 at $685 billion, then fall 23% to $531 billion in 2028.
The core risk lies in cash generation. Goldman reports that hyperscalers posted negative free cash flow in the third quarter as capital spending exceeded operating cash flow. Delayed monetization and growth in purchase commitments pose "key risks to more debt issuance," Goldman said.