Between August and last week, CoreWeave (CRWV) broke down from its key $85-$90 support zone (based on the 50- and 200-day moving averages). That cast doubt on the AI leader, NVIDIA (NVDA).
CoreWeave has around $50 billion in debt. Nvidia has a ~10% share stake in the firm. The five-year credit default swap, or CDS, traded at record distress levels. The CDS market is pricing in an increasing risk of a debt default. Debtholders have most of CoreWeave’s debt backed by Nvidia chips. A default would trigger a liquidation event. That might flood the markets with an excess supply of AI servers.
NVDA stock slumped slightly, falling by around 13% from its 52-week high. Though the 5.08 trillion is huge, the firm risks losing the most valuable title again to Apple (AAPL). Apple is not relying on its steady growth by investing in AI. Instead, its newest devices power basic features of Apple Intelligence. Google (GOOG) Gemini will handle more advanced AI queries on the Siri AI platform.
AI downstream suppliers like Coherent (COHR) and Lumentum (LITE) dropped by close to 10% last week. Chip firms like AMD (AMD) and Intel (INTC) also erased recent gains. Broadcom (AVGO) and Taiwan Semiconductor (TSM) did not rise after posting strong quarterly results.
Bearish sentiment for AI names worsened this month. That might reverse quickly. It will depend on the willingness of speculators to bet that the AI boom is still accelerating.
