- CoreWeave is changing how it borrows. The AI cloud provider is preparing a chip-backed loan worth several billion dollars to fund Nvidia chips and other equipment for a contract with an unnamed investment-grade customer, expected to cost about 7% to 7.5%, less than half the yield on its unsecured debt, the Financial Times reported.
- The unsecured market is closed to it for now. “Looking ahead, we will not use the unsecured debt market to fund our business at current yields. Nor do we need to,” CEO Michael Intrator told analysts Tuesday, as some of its unsecured debt trades in distressed territory. Chip-backed loans cover between 70% and 100% of equipment costs, depending on the customer, he said.
- Prepayments are filling the gap. CoreWeave expects about $9 billion of customer prepayments and deposits over the next three months and plans to seek more, with Intrator saying “in the current environment, pre-payments are more attractive.” It expects to raise less than $5 billion of new capital at the parent level through 2027, and has an unused at-the-market program to sell up to 35 million shares, worth about $1.7 billion at current prices.
- The balance sheet keeps swelling. Debt and lease liabilities rose to $66.2 billion at the end of the third quarter from $51.6 billion at the end of June, interest expense nearly tripled to $846 million, and the company expects it to reach as much as $1.15 billion in the fourth quarter, according to the FT.
What Happened?
CoreWeave reported third-quarter revenue up 168% year over year to $3.7 billion, above its own $3.45 billion to $3.6 billion guidance, and its backlog grew to $132.5 billion from $104 billion at the end of June, the FT reported. Third-quarter capital expenditure totaled $14.5 billion against operating cash flow of $2 billion, and the company expects to spend as much as $39 billion on capex this year. It ended the quarter with $4.1 billion of cash and $2.3 billion of restricted cash. With more than 1.7 gigawatts of active power at the end of September, CoreWeave is the largest of the neoclouds.
Why It Matters?
The shift shows how neoclouds are being pushed from corporate borrowing toward asset-backed and customer-funded structures as investors question whether they can finance their plans. Secured, contract-linked loans at roughly 7% are far cheaper than unsecured debt trading at distressed levels, but they tie lenders’ fortunes to specific chips and specific customers, which makes the creditworthiness of those customers central to the trade. The upcoming loan will also test broader private-credit appetite for AI hardware financing at a time when the sector’s stock and debt have sold off.
What’s Next?
Investors should watch the pricing and size of the chip-backed loan as a gauge of lender demand. Finance chief Nitin Agrawal said that if CoreWeave builds only the capacity customers have already committed to, 2027 capex would stay in line with this year’s, adding, “We have levers to control our capex.” Delivery on the $9 billion of expected prepayments and the trajectory of fourth-quarter interest expense will show whether the funding plan holds.
Affected Tickers and Coins: CRWV, NVDA, HYG, JNK
Source: Financial Times
