"Things are looking up": Nvidia's CEO saw no need to hedge against CoreWeave

The financial position of CoreWeave, a provider of AI cloud services to which Nvidia supplies computing systems, is becoming increasingly stable, said Nvidia CEO Jensen Huang. He was thus attempting to restore confidence in CoreWeave after concerns about the company intensified in the credit market and investors began to assess its default risk as higher, Bloomberg explains. Nvidia is CoreWeave’s second-largest shareholder and owns approximately 10% of the company.

“CoreWeave’s position is improving every day,” Huang told Bloomberg at an event in Stockholm. He said he sees no need for Nvidia to act as a financial guarantor for the company: “I’m optimistic. The cost of raising capital for them is actually decreasing,” he said.

CoreWeave has become a key test of viability for a new generation of companies that have emerged amid virtually insatiable demand for AI computing power, according to Bloomberg. Companies like CoreWeave have been actively taking on debt with the support of their suppliers, including Nvidia. This has raised concerns about so-called circular financing, in which suppliers effectively help finance purchases of their own products, creating the risk of artificially inflating demand.

During Thursday’s trading session, CoreWeave’s stock fell by more than 7% before the decline slowed to 2.3%. The day before, the stock had dropped 15% following a Gartner report: analysts estimated that more than 80% of non-cloud providers would not be able to survive as independent companies after 2030 if spending on AI infrastructure continues to grow at a rapid pace.

According to LSEG, CoreWeave raised $22 billion in the bond market and secured $26 billion in loans. The cost of five-year credit default swaps on CoreWeave’s debt rose by 74.5 basis points at one point on Thursday, reaching 1,194.5 basis points, according to ICE Data Services. This is the highest intraday level on record, Bloomberg notes. Credit default swap prices imply a probability of more than 60% that CoreWeave will default within the next five years.

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