2 min read
Neocloud stocks like CoreWeave (CRWV) and Nebius (NBIS) are poised to cap off a horrible week in their relatively short time in public markets.
CoreWeave and Nebius stocks are both down about 15% just in the past five days.
While concerns about CoreWeave’s financial health are being blamed for the neocloud stock routs, the reality is that it’s not just a CoreWeave issue. The overall financial health of the AI economic system build-out is being more closely scrutinized in a land of higher-for-longer interest rates.
Goldman Sachs explained the pressure quite well in a new note on Friday.
US dollar high-yield AI-related debt spreads widened by 25 basis points between Oct. 13 and 14, reaching a new high of 360 basis points over Treasurys. By contrast, non-AI-related debt spreads were only two basis points wider and remain below their March peak, Goldman Sachs pointed out (see charts below).
Within AI-related debt issuers, the widening has been concentrated in AI-related corporate bonds and data center project finance.
“While some softer AI-related sentiment can move datacenter bonds wider, especially if there is a reassessment around off-taker credit risk, we view AI-related corporate bonds, from either neoclouds or firms with significant frontier lab exposure, as being at the epicenter of the funding cost debate,” Goldman Sachs strategist Amanda Lynam explained. “Further removed AI-adjacent Energy and Utilities have been more resilient, in our view partly reflecting more diversified revenue streams and a relatively defensive earnings profile. We think the widening reflects a reassessment of the economics of the AI buildout, particularly for lower-rated borrowers that are more exposed to higher-for-longer rates and potential energy-cost pressures.”
Lynam sees “some near-term reversal” of the recent sell-off in US high-yield debt tied to AI. But she acknowledges that “dispersion across AI-related issuers is likely to remain high.”
69.69 +3.91 (+5.94%)
At close: October 15 at 4:00:01 PM EDT
65.92 -3.77 (-5.41%)
Pre-Market: 9:22:43 AM EDT
CRWV NBIS
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the Sozzi Unleashed morning show and the Power Players with Brian Sozzi podcast, and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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