The sell-off is a funding scare: investors worry that AI buildouts depend on cheap debt, and that hits the whole group at once. Core Weave fell 12% on October 16 and was on track for a 25% weekly loss. Nebius is down about 25% in a week and roughly 42% below its June close.
Core Weave is the most extreme case. Demand isn't the issue: backlog was about $104 bn at the end of Q2, and Q2 revenue grew 112% and beat estimates. The problem is the balance sheet. It reported a $626M net loss, with net interest expense around a quarter of quarterly revenue. Debt is roughly $28-35 bn depending on the measure, and one projection has analysts expecting it to reach $47.6 bn by year-end.
The credit market is flashing warnings: bond yields have climbed to around 15% and the cost of insuring its debt against default hit a record. A recent analysis called it more of a credit story than a demand story, and I agree. If markets stay open it can grow into its debt, but if funding tightens, equity holders are last in line.
Q3 results come in mid-November. Let's see what is the outcome [Observation] [Observation] [Observation]
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