Bad for ↓
AI stocks fell hard in the week to October 16 as worries about AI debt grew. CoreWeave borrows heavily to build AI data centers, and its borrowing costs soared. That hurts CoreWeave. It could also hurt Nvidia, which sells chips to data-center buyers like it that pay with loans.
Source: MarketWatch ↗
When a customer buys on credit and its loans get expensive, the companies that sell to it can lose orders too.
The Nasdaq fell about 4.5% in the week to October 16, its worst week since June. The worry centred on CoreWeave (CRWV), which rents out AI computing power. Its 2031 bonds yielded around 15% to 16%. The cost of insuring its debt against default rose to a level that suggests better-than-even odds of default within five years. CoreWeave pays for graphics chips largely with loans, and investors sold peers such as Nebius alongside it. Bank of America expects CoreWeave's spending to exceed its cash coming in by about $67 billion through 2028. Pricier loans could mean fewer or later chip orders for Nvidia (NVDA). The semiconductor index lost about 12% in six sessions. How much of Nvidia's sales comes from these borrowers is not yet known.
Chip stocks have already fallen sharply, with the semiconductor index down about 12% over six sessions. Nvidia fell a milder 6.6% over the five trading days to October 16, and only 1.4% on Friday. Views on CoreWeave are split. On October 15, Nvidia CEO Jensen Huang said CoreWeave's cost of capital is falling and that Nvidia does not need to backstop it. Cantor Fitzgerald called the selloff overdone, and Bank of America still expects CoreWeave's operating profit to cover its interest bill by 2028. The stress spread beyond CoreWeave: on October 14, Oracle and server maker Dell also fell, alongside hot inflation data that raised bets on a Fed rate hike and a Barclays downgrade of Dell.
Why that may be wrong
Nvidia's shares fell far less than CoreWeave's, which suggests investors don't yet expect weaker chip orders. Any cut in orders from debt-funded AI clouds would show up only in later quarterly reports.
The link breaks if CoreWeave's lenders calm down and its borrowing costs fall back. A clear sign would be its 2031 bond yield easing well below 15% in the weeks after October 16, or Nvidia's next quarterly report showing data-center sales still climbing.
Big chip buyers may simply absorb any slack. Nvidia's sales grew 106% in the quarter to July 31, 2026, and its largest customers may not rely on borrowed money at all. Huang has also publicly defended CoreWeave. Bond-market stress sits mainly with AI borrowers. Overall junk-bond spreads were about 3.23% on October 15, so credit is not tight everywhere. After the DeepSeek selloff in January 2025, chip stocks recovered as spending plans held.
In the 2000 to 2002 tech bust, telecom companies that had borrowed to build networks failed. Their equipment suppliers, such as Cisco and Lucent, lost orders as customers cut spending, and suppliers' revenue collapsed.
CoreWeave rents out AI computing power and pays for its data centers largely with borrowed money. In the week to October 16, its 2031 bonds yielded around 15% to 16%. So lenders now want about 15 to 16 cents a year for every dollar they lend it.
A company that borrows to buy equipment usually buys less, or buys later, when loans get that expensive. Bank of America expects CoreWeave to spend about $67 billion more than it takes in through 2028. That means it needs lenders to keep saying yes. Think of a builder whose bank raises the loan rate halfway through the house.
Tighter loans for CoreWeave and its peers could mean fewer chip orders. That would reach Nvidia, which sells graphics chips to these buyers and also owns a stake in CoreWeave. How much of Nvidia's sales depends on these borrowers is not yet known, so the size of any hit is unclear.
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