A look inside the $52 billion hole that CoreWeave needs to climb out of
In this news:
Key takeaways
- Global stocks rose as investors bought the dip following recent tech sector volatility.
- CoreWeave faces $52 billion in combined debt and lease commitments amid skepticism from analysts.
- U.S. state legislatures are increasingly introducing restrictions and moratoriums on AI data centers.
Global markets bounce back
After a grueling couple of days for tech stocks—propelled by drama and speculation around CoreWeave’s debt—traders bought the dip in the last 24 hours and stocks rose globally. U.S. futures are up before the open in New York, too.
Much of the gains were in non-tech stocks. While the S&P 500 gained 0.33% yesterday, the tech-heavy Nasdaq was flat, and the equal-weight S&P was up a solid 1.36%. “378 names in the S&P 500 were higher on the day,” Deutsche Bank’s Jim Reid noted. The index remains within 1% of its record high.
“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,” Chris Beauchamp, the chief market analyst at trading platform IG, told Fortune in an email.
Regulatory hurdles facing artificial intelligence
The collapse in the price of CoreWeave stock has dragged down the entire tech sector in the last couple of days, and focused investors’ minds on the risks attached to AI. And although the chatter has revolved around the “existential threat” of rogue AI agents, customers who aren’t seeing productivity gains, AI CEOs like Dario Amodei and Sam Altman urging a slowdown in development, and the widening spreads on debt issued by CoreWeave and Oracle, Macquarie’s Thierry Wizman and Gareth Berry point out that there’s another set of hurdles in the system: The number of U.S. states legislating against the development of AI.
“The approach of the U.S. mid-term elections, with its prospect of a ‘blue wave,’ may be alerting investors to the possibility that new data-center ‘moratoriums’ may be enacted at various U.S. state legislatures once the Democrats have achieved new or larger majorities in those chambers. So far, anti-AI legislation has taken the form of blocking subsidies for AI data centers. Much of that legislation is already sitting at the legislatures and ready to be (re-)voted upon early next year,” they said in a note to clients.
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