The fear surrounding CoreWeave (CRWV -11.16%) stock just deepened. Its bond yields have spiked to 15% as it seeks capital to meet the massive demand for its AI-ready neocloud infrastructure. Although this does not affect the company's ability to service existing bonds, it could make it more expensive to raise capital in the future.
Indeed, many investors may see this as a contrarian pick when comparing CoreWeave's revenue growth to its valuation. Nonetheless, given the power of debt to undermine stock growth stories, investors should not yet see CoreWeave stock as a contrarian pick, and here's why.
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CoreWeave's debt challenges
Investors will have to wait until CoreWeave releases earnings for the third quarter of 2026 on Nov. 9 to know where the company currently stands on its debt. What's obvious is that CoreWeave's backlog is huge: it ended the first half of the year with a $104 billion revenue backlog, and it grew by at least $25 billion in Q3. Earlier this year, that prompted me to buy some CoreWeave shares.
Unfortunately, since it is a money-losing enterprise, it has turned primarily to the debt markets to find the capital to build additional infrastructure. As of the end of Q2, the total debt stood at over $35 billion, a tremendous amount for a company with a $5.0 billion book value.
To that end, the rising yields for the company's bonds made me uncomfortable with this debt, and I have since closed my CoreWeave position. Now, the recent sell-off may indicate that I am not the only one uncomfortable with CoreWeave's financial situation.
CRWV CoreWeave
NASDAQ · As of 1:48 PM ET 10/16/26
Admittedly, given that CoreWeave's revenue rose 112% year over year in the first half of 2026, the high bond yields may not spook all its shareholders. Also, the price-to-sales (P/S) ratio of around 4 may make this stock a draw for contrarian investors. Still, even if it can sustain its rising, high-interest debt burden, it could leave investors wondering about the future of CoreWeave should growth slow for a time.
Its other option is nearly as bearish for shareholders. Instead of taking on more high-interest debt, CoreWeave could issue more shares.
At the same time, the number of outstanding shares has already risen by almost 19% since its March 2025 IPO, a factor that tends to increase selling pressure. Accelerating that pace will likely push share prices lower, meaning more pain for shareholders. Amid such conditions, investors may not find contrarian buying appealing right now.
Is it time for contrarian buying of CoreWeave stock?
Given CoreWeave's financial condition, now is probably not a good time for contrarian buying.
CoreWeave benefits from a huge backlog and triple-digit revenue growth, indicating strong demand for its AI infrastructure.
However, rising bond yields make CoreWeave's borrowing strategy extremely risky. While its approach may work if growth does not slow, even a temporary slowdown in AI could undermine the company's finances.
Looking forward, if CoreWeave proves it can endure an AI slowdown, the cloud stock could be headed for a bright future. Still, until it can survive such a shakeout, investors are probably best off avoiding this stock.
