CoreWeave's AI Spending Slows, Equity Could Plummet to Zero, D.A. Davidson Warns
Key Summary
D.A. Davidson analyst Gil Luria warns that CoreWeave's equity could go to zero if AI spending slows, citing the company's heavy leverage and thin margins. The stock has fallen 15% after Luria's warning, and CoreWeave's bonds have also sold off, pushing yields up to 15-16%.
Precedent & Market Context
CoreWeave has spent the AI boom as one of its loudest beneficiaries, but analyst Gil Luria is warning that the company's equity could be worth nothing if the AI spending cycle cools.
Main Event
Luria's warning comes down to a basic spread problem. By his account, CoreWeave borrows money at roughly 9% and earns returns on that capital at around 1%.
Debt is the other half of the problem. CoreWeave's borrowings now sit close to $50 billion, according to research findings.
Analysis & Market Impact
Luria cast CoreWeave as a potential example of the sector's excesses, pointing to its heavy leverage and thin margins. He kept a Neutral rating on the stock, but flagged the company's dependence on debt financing as a red flag.
Implications & Outlook
The most direct stakes fall on CoreWeave shareholders and bondholders, and their interests are not identical. In a stress scenario, creditors stand ahead of equity holders in line. If AI spending slows, stockholders are the first to absorb losses.