Credit concerns surrounding CoreWeave, a U.S. cloud services startup, have spread through the U.S. stock market, and investors are beginning to focus on the risk that investment in AI-related infrastructure could slow.
CoreWeave shares fell 25% last week, while the Nasdaq Composite dropped more than 4%. With earnings reports from major tech companies ramping up this week, the market is focused on whether massive investments will translate into profits.
Unease Spreads Among Companies Supporting the AI Boom
The central player this time is CoreWeave. It leases data centers equipped with AI chips to AI developers and others. In a sense, it is like a landlord renting out “computing power” as equipment for the giant factory that is AI. Fueled by the global AI boom, the company has rapidly expanded its business.
The company, however, continues to operate at a loss, and its debt stood at about $52 billion as of the end of June, equivalent to roughly ¥8.2 trillion. As demand grows, so does capital spending, which the company finances through borrowing. The faster the growth, the more attention turns to the outlook for repaying that debt.
A Drop in One Company's Stock Becomes a Question for the Entire Market
CoreWeave shares fell 25% over the course of last week. What is notable is that the decline was not confined to the company. The sell-off spread to other tech stocks, and the Nasdaq Composite fell more than 4%.
In other words, the market took credit concerns at one company as a question for the entire industry: “Will AI investment generate adequate returns?” That does not mean a reduction in AI investment has been decided. But it is clear that the expansion of facilities, which until now has often been discussed in terms of momentum, is beginning to be measured against whether it will generate enough profit to repay borrowed money.
Earnings Reports to Test Returns on Massive Investments
This week, Meta, SpaceX—a space exploration company that also has AI-related businesses—and electric vehicle giant Tesla are among the companies scheduled to report earnings. Big Tech companies are also investing heavily in AI data centers, and the focus is on whether that spending will pay off in profits.
Some in the market are questioning whether companies can generate enough profit to justify their investments. In these earnings reports, the key issue is likely to be how they explain the path to monetization, rather than simply the scale of their spending.
Conditions for Funding Sources Also Turn Unfavorable
The investment environment is also facing headwinds. Borrowing costs are rising amid higher energy prices caused by turmoil in Iran and expectations of further rate hikes by the Federal Reserve (Fed). Data centers consume large amounts of electricity, so rising energy prices affect operating costs. Higher interest rates also increase the burden on businesses that borrow to expand their facilities.
Competition in AI infrastructure was often seen as a technology race over chip performance and the scale of facilities. But the financial battle—how to raise funds and recoup investments—is also becoming more prominent. This week's earnings reports look set to reflect that turning point.
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