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CoreWeave can overcome the market’s skepticism about its debt.
That isn’t the consensus view — some Coreweave debt remains deeply distressed with yields above 15%. But Coreweave should power through this tough stretch, according to John Lloyd, global head of multi-sector and corporate credit at Janus Henderson.
“It’s a little bit of overreacting,” Lloyd tells CNBC, referring to the sell-off in Coreweave bonds, which have tanked along with its equity.
Lloyd owns Coreweave 9.75% bonds due in 2031 in the firm’s Multi-Sector Income Fund. The yield to maturity on the debt is now 15.97%, a more than 70% jump since its issuance in April. Bond prices and yields move in opposite directions.
“Bond prices are lower, spreads are wider, yields are wider, and I don’t see a huge fundamental change in the ecosystem right now that would warrant that, other than their higher cost of financing, which I think they can get creative with,” Lloyd added.
CoreWeave has taken on a massive amount of debt to fund its data center buildout. The company has roughly $51.6 billion in total debt, including about $35 billion in notes, bonds and loans.
The market is getting nervous about how CoreWeave will be able to keep financing its data centers, and at what cost. Its stock has tumbled 20% over the past week, while the spread on its five-year credit default swaps is 1,085 basis points — lower than earlier in the session but up 14% week over week. Spreads of 1,000 basis points and above are generally a sign of credit distress.
CoreWeave shares moved roughly 2% higher on Tuesday, after tumbling over the past several days and hitting a 52-week low earlier in the session. Its bond yields and spreads remain highly elevated.
CoreWeave’s 9.75% bond due in 2031, in afternoon trading on Oct. 20, 2026.
Lloyd believes the selloff is a bump in the road for the neocloud company.
The market has been spooked by the jump in Treasury rates, which pushes up funding costs for companies, he explained. The focus largely turned to companies like CoreWeave that have refinance risk when rates move higher, he said.
CoreWeave five-year credit default swap spreads during afternoon trading on Oct. 20, 2026.
CoreWeave leverage is high with a debt-to-equity ratio of 702%, up from 290% a year ago. Moreover, CoreWeave will spend an estimated $36.4 billion on capital expenditures this year against Ebitda of $7.5 billion, according to consensus estimates.
Revenue and Ebitda will ramp up next year, hitting $26.5 billion and $16.7 billion respectively, analysts estimate. But capex will hit $47.9 billion, indicating the company may need to finance its data center buildout with more equity issuance and/or debt.
Creative funding
Lloyd isn’t necessarily worried about CoreWeave’s ability to finance its capital expenditures, despite the fact that its capex outweighs its free-cash flow.
“Next year … they’re going to be generating operating free-cash flow that’ll support some of that capex need,” he said.
The company can also turn to other methods of funding, like more GPU financing, which will allow it to borrow against its graphics processing units or rental contracts, he noted. In addition, CoreWeave could ask its biggest customers — including Microsoft, Meta Platforms and OpenAI — to increase their prepayments, he added.
“They can probably get creative enough where they don’t even need to come to the high-yield market,” Lloyd said.
The company also doesn’t have any near-term maturities, which means it isn’t facing a refinancing risk anytime soon, he added.
CoreWeave’s stock performance over the last month.
‘Best in class’
Meanwhile the supply/demand dynamic should remain tight across the AI compute landscape. Overall adoption rates within the ecosystem are running above consensus demand curves, he said. Add to that a bottleneck in supply, with chips and memory power sold out, and it’s a nice set up for CoreWeave.
“All data point to the business model functioning very, very well,” Lloyd said. “CoreWeave is one of the best-in-class at getting data centers up and actually running them,” he added, noting that CoreWeave’s financials have been improving throughout the year.
Another turning point could come if Anthropic goes forth with an IPO, expected in November, followed by OpenAI. Successful IPOs for the frontier labs could soothe market nerves and help support the neocloud operators.
“You just need more of those data points where people become more comfortable with the AI demand side,” Lloyd said.
CoreWeave still needs to convince markets it can handle higher market rates and get through the financing bottlenecks.
Lloyd sees the company making it, albeit with some bumps along the way. The bonds should recover, he says, “just not in that straight line.”
— Gina Francolla contributed reporting.
