CoreWeave to Take Out a Loan Secured by Nvidia Chips Amid Rising Bond Yields

CoreWeave is preparing to test investors’ appetite for funding AI projects, with plans to raise several billion dollars through a loan secured by chips, according to the Financial Times. The so-called “neocloud” is increasingly relying on asset-backed debt financing and prepayments from customers to fund further expansion. Some of its unsecured bonds are trading at junk-grade levels, making it difficult to secure new loans at the parent company level.

“Going forward, we will not use the unsecured debt market to finance our business at current rates. We don’t need to, anyway. We built CoreWeave to be a sustainable business,” CEO Michael Intrator told analysts following the release of the quarterly report on November 10.

CoreWeave’s strategy shift reflects the pressure facing cloud providers that offer AI infrastructure, the FT notes. These companies had sought to capitalize on the artificial intelligence boom, but in recent weeks, their stocks and debt securities have plummeted in value. Investors are increasingly doubting whether these companies will be able to finance their ambitious plans and meet their commitments.

The new loan will finance the purchase of Nvidia chips and other computing equipment under a contract with an unnamed investment-grade CoreWeave client, the company said. The loan is expected to carry an interest rate of 7–7.5% per year—less than half the yield on CoreWeave’s unsecured bonds. An FT source among CoreWeave executives clarified that the loan will raise several billion dollars.

According to CoreWeave's CEO, loans secured by chips cover between 70 and 100 percent of the equipment's cost, depending on the customer.

CoreWeave reported that it expects to receive approximately $9 billion in prepayments and deposits from customers over the next three months and plans to continue actively seeking such advance payments. “Under current conditions, prepayments seem more attractive,” Intratore noted.

At the parent company level, CoreWeave expects to raise less than $5 billion in new capital by the end of 2027. The company has not yet initiated a share sale program on the market for up to 35 million shares (approximately $1.7 billion at current prices).

At the end of the third quarter, CoreWeave had $4.1 billion in cash and $2.3 billion in restricted funds. Total debt and lease obligations rose to $66.2 billion, compared with $51.6 billion at the end of June. Revenue for the quarter increased 168% year-over-year to $3.7 billion, exceeding the company’s own forecast of $3.45–3.6 billion. The full-year revenue forecast has been raised to $13–13.3 billion, and the order backlog increased to $132.5 billion from $104 billion at the end of June.

However, due to rising borrowing costs, the net loss increased to $709 million, compared with $110 million a year earlier, interest expenses nearly tripled to $846 million, and CoreWeave estimates they could reach $1.15 billion in the fourth quarter. Capital expenditures for the quarter totaled $14.5 billion, with operating cash flow of $2 billion. For the full year, the company expects capital expenditures of up to $39 billion, but anticipates a slowdown in spending growth in 2027, depending on market conditions.

Chief Financial Officer Nitin Agrawal explained that if the company were to build capacity solely to meet already contracted demand, capital expenditures in 2027 would remain at this year’s level: “We have the tools to control capital expenditures. This is a capital-intensive business, and we manage that capital responsibly.”

As of the end of September, CoreWeave's active capacity exceeded 1.7 gigawatts. Based on this metric, the company remains the largest neocloud provider, and in terms of AI computing power, it is comparable only to SpaceX.

The company's stock rose by about 17% in after-hours trading following the release of the report.

Back in October, the yield on the company’s eight-year bonds, issued at 9.58% per annum, rose above 15%, and the market estimated the probability of its default at 63%, compared with 30% a year earlier. Earlier that same month, the company’s co-founder, Brennin McBee, said that CoreWeave was seeking access to capital from insurance companies as a cheaper source of financing, calling it “all the money in the world concentrated in the insurance sector.” Nvidia remains a key partner of CoreWeave: the chipmaker previously committed to purchasing the company’s unsold cloud capacity under a $6.3 billion contract and has additionally invested $2 billion in it.

This article was AI-translated and verified by a human editor