CoreWeave needs tens of billions more debt with $5.5 billion cash versus $27.6 billion long-term debt; its notes yielded over 15% on fear of missed interest. Fixed contract prices make higher funding costs riskier, and in bankruptcy equity holders are paid last, so the stock fell and may recoup little.

I now want to address again CoreWeave and what's going on in the bond markets, and this is really important.

The bonds that we're considering right now from CoreWeave are these ones issued in April 2026, and the first interest payments were going to be paid actually on October 1st.

Coreweave holds about 1.75 billion of these senior notes on their balance sheet.

As of the end of Q2 2026, CoreWeave had $5.5 billion in cash, total cash in investments. Current portion of long-term debt, $7.5 billion.

Long-term debt, $27.6 billion. And the company has said they are going to need a lot more cash, tens of billions of dollars in the next year or two alone, to continue building out data centers.

Obviously, with just $5.5 billion in cash, what does that mean? Well, they're gonna have to issue more debt.

Plus, they have some current debt, $7.5 billion, that is going to have to be settled somehow. They're either going to have to pay these bonds off or they're going to have to refinance them.

Investors are increasingly worried that CoreWeave might be at risk of not being able to pay the interest. But let's adjust these for those CoreWeave bonds that I showed you. So the coupon rate is almost 10%, 9.75%.

The maturity isn't ten years, it's actually five years.

The coupon rate being the interest rate that CoreWeave has agreed to pay investors 9.75%. So like an investor that originally bought those bonds back in April, maybe he doesn't want them anymore.

They've decided there's too much risk in holding Coreweave bonds, so what happens here is the market yield will change based on the price of the bond.

Conversely, if investors are selling the bonds, in this case, CoreWeave went up, the yield went up to over 15% at moments last week. The price goes down.

More investors are selling the bonds than investors are buying, and so the price drops on the open market, and that pushes the effective yield higher, because any investor that buys right now is buying at a discount.

So not only are they getting the 9.75% coupon rate that CoreWeave is obligated to pay, the interest rate.

It's not just CoreWeave, it's also the other NeoCloud companies and the hyperscalers issuing tens of billions of dollars of debt.

When a company like CoreWeave in particular, we're gonna focus on CoreWeave, when they sign these customer contracts for data center compute capacity, GPU compute capacity, those terms are fixed.

They're going to get a fixed payment for that agreement, and that's a binding price agreement for the customer that bought it.

But if CoreWeave's expenses go up because they're going to need to raise more debt to continue build out the capacity, but the yield is higher than it was earlier in 2026. That's now a higher risk business proposition for a CoreWeave investor.

Also remember, if there is some sort of bankruptcy event, or a renegotiation, owners of the bonds get paid first. Equity investors get paid last. Whatever's left over after debtors are paid off, that's what equity investors get.

And so that's why the stock price of CoreWeave, Nebius, and other NeoClouds tanked last week. It's not just fear of what's happening in the bond market and irrationality there.

It's a real risk that if there is a bankruptcy and you own the stock, there might not be much there left for you to recoup in value.

So the stock price comes down to account for that new risk, higher probability risk of there being a bankruptcy or some liquidity event where CoreWeave is not able to make an interest payment.

They have to renegotiate the debt, a.k.a. bankruptcy.

That's what bankruptcy is. You have to go renegotiate the debt. And worst case scenario, that bankruptcy ends in some sort of insolvency, and the assets are sold off to pay off those debtors, and you get pennies on the dollar.