CoreWeave’s mounting debt and lease commitments have unsettled investors, after the artificial intelligence infrastructure company disclosed obligations totalling about $52 billion against quarterly revenue of $4.6 billion.
The company reported $35.6 billion in total debt and a further $16.3 billion in operating lease liabilities in its second-quarter results. Its operating expenses exceeded sales, leaving it with a net loss of $1.4 billion.
The figures have raised questions over how CoreWeave can meet its obligations while it remains loss-making. The company’s main answer is a large book of contracted future revenue.
CoreWeave said it had $103.7 billion in remaining performance obligations, with 41 per cent due to be paid by 2028. The agreements are on a “take or pay” basis, meaning customers are committed to paying even if they do not use the contracted services.
That reliance on future customer payments has prompted scepticism. Francine McKenna, an accountant and investigative journalist who has taught at the Wharton School, said: “If CoreWeave is counting on Microsoft to honor its contracts and bail them out of extreme debt and losses I have a bridge in Brooklyn I’d like to sell them.”
CoreWeave debt concerns weigh on technology shares
Speculation surrounding CoreWeave’s finances contributed to a sharp sell-off in technology shares over several days, although markets recovered as investors bought the dip and moved into other sectors.
The S&P 500 rose 0.33 per cent, while the technology-heavy Nasdaq was flat. The equal-weighted S&P 500, which gives each company the same influence, gained 1.36 per cent, with 378 companies in the index finishing higher.
Chris Beauchamp, chief market analyst at trading platform IG, said: “The selling in tech has been stopped in its tracks, while the rotation into other sectors continues. Tech stocks aren’t out of the woods yet, but rotation of this kind is just what investors need to see, even if it is a deeply painful experience for tech fans.”
S&P 500 futures were up 0.42 per cent, while the Stoxx 600 rose 0.46 per cent in early trading. South Korea’s Kospi gained 2.05 per cent, Japan’s Nikkei 225 rose 1.39 per cent, India’s Nifty 50 added 0.36 per cent and China’s CSI 300 increased 0.11 per cent.
