CoreWeave's stock and bonds were both hit on Wednesday as investor fear grew that some technology companies are borrowing too heavily for the artificial intelligence build-out.
Shares of the so-called neocloud nosedived 16%, while yields on its debt jumped higher. The yield to maturity on its 9.625% bond due in 2032 is sitting at 14.8%, while that of its 9.75% bond due in 2031 is around 14.9%. Bond yields move inversely to prices.
While investors were once excited about getting in on the AI action, investor sentiment has started to shift, said Luis Alvarado, co-head of global fixed income strategy at Wells Fargo Investment Institute.
Now, investors are demanding more risk compensation, he said.
"The era of easy money, which we experienced in the first nine months of the year, is starting to disappear and dissipate," Alvarado noted. "Now the extra dollar or the marginal dollar is going to be more looked at with a microscope into the concessions that the issuer is giving you back."