David Lin on $CRWV (Oct 26, 2026)
CoreWeave's bonds yield 15% to 16% while return on invested capital is below 10% and the stock fell 40% in October; its yield is almost 500 basis points above the triple C curve, so the market prices higher default risk specifically for CoreWeave. The speaker calls it marching towards default with a dangerous financing feedback loop, but does not claim it is at risk of default and says it can recover, likely via financing outside public markets or from larger hyperscalers.
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CoreWeave has been all over the news because uh they have financing problems. Some of their debt uh some some of some of their bonds have now reached yields of above 15 to even 16% while their return on invested capital remains below 10% and their stock's down 40% just in October.
So if you have a company like CoreWeave as an example where their bond yields are trading at 15%, well that's equity like returns and as investors you have to think if you're getting equity like returns you're taking equity like risk.
And so I actually charted out um uh CoreWeave's yields compared to um the the the B+ curve which that's where it was currently rated, the the single B, B- and triple C. And its yield was, you know, almost 500 basis points above even the triple C curve.
So the market's pricing in for a higher risk of default specifically with CoreWeave.
And in the case of Coreweave, it's marching towards default. I mean any any lifeline they could use to avoid defaults at this point? Cuz if they keep financing to pay off their debt, their yields are going to get even higher as their credit scores go down or their creditworthiness goes down, rather. And that creates a dangerous feedback loop.
Yeah, that's right. And and the only way out is through, you know, as as you know, as as we're taught. And so, if if they can get funding from some of these larger hyperscalers, that may help them.
And and and I'm not saying that Coreweave is at a risk of default. I'm I'm just saying that that's where their debt is currently trading. And so, certainly they have the ability to recover, but to your point, it's going to be through financing probably outside of the public markets because the public markets are pricing their debt at that 15%.
And so, they'll have to seek funding outside of that.
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