CoreWeave (CRWV) closed at $55.60 on Thursday, Oct. 22. That's down $6.22, or about 10%, and it hit a new 52-week low of $53.50 along the way. Its bonds due in 2032 sell for just under 80 cents on the dollar. A month ago they were near 90. In Thursday's Heard on the Street column, Asa Fitch argued the company has a rich friend who'd likely step in.
That friend is Nvidia (NVDA). It owns about 10% of CoreWeave's stock. Nvidia has fed CoreWeave its newest AI chips in bulk and backed it with money. Nvidia has never said it would come to the rescue. Fitch argues Nvidia has too much riding on CoreWeave to let it sink. That's his argument. Nobody has promised it.
Here's why Nvidia cares. About half its data-center chip sales in recent years came from a few tech giants, like Amazon (AMZN) and Microsoft (MSFT). Nvidia's gross margin, the share of sales left after the cost of making its chips, was about 75% last quarter. That's a fat markup. It gives those giants a reason to build their own chips. CoreWeave is a big buyer that won't ever make a rival chip. Its filing before its IPO last year said the partnership would “help to diversify their customer base.”
What a bond at 80 cents says
CoreWeave signs strong tech companies to leases for computing power. Then it borrows against those leases and the gear to build more. Fitch sees little risk in the lease deals themselves. The risk is the other debt, the money borrowed to grow everywhere else. BNP Paribas noted on Monday, Oct. 19, that most of the parent company's debt comes due after 2030. That buys time. Higher rates, or lenders souring on AI debt, would darken the picture. Jim Russo, a portfolio manager at AllianceBernstein, put it plainly in Friday's paper. “The financing constraint over just the last three to four months has become real,” he said. A bond is a loan with a price tag. Pay just under 80 cents now, and you're owed a full dollar in 2032 if CoreWeave pays in full. That gap is the price of doubt. The yield, your yearly return if you hold to the end, sits well into double digits, the column says.
Our read
This is a Fixed Income IN02 story. A rescue a columnist calls likely is still a maybe. The bond price tells you how big a maybe. Under 80 cents means buyers want a fat cushion in case the help never comes. CoreWeave is held in one book, the Chips Supply satellite sleeve, at 16%. Nothing was added and nothing was trimmed. A small sleeve is the right home for a company whose bonds trade like this. Nvidia is held at weight in 31 books, with nothing added. Our verdict is watch.
Here's where it meets your own money. Your bond fund may hold paper like this, especially if its name says high yield or income. This week, open the fund's fact sheet and find the share of bonds rated below investment grade, the junk tier. If the fund prints an average price, note that too. A price well under a dollar means buyers doubt they'll be paid in full, like CoreWeave's 80 cents. Bonds like that are paid to carry doubt. That's a different job from the safe part of your plan. Roofs get patched in July, while it's dry. If the numbers surprise you, bring the sheet to a review.