"AI Firm 'CoreWeave' Distress Shock Unlikely to Spread to Big Tech" [Weekend Money]
No risk of spillover to financially strong Big Tech
Unconditional faith in AI faces a reality check
U.S. inflation exceeding expectations heightens uncertainty
An analysis has found that the risk of CoreWeave, a U.S. artificial intelligence (AI) cloud provider, spreading across the AI sector is low. However, amid concerns that high interest rates will persist, the timing of the U.S. Federal Reserve’s eventual end to its rate-hiking cycle is expected to be a key variable.
!["AI Firm 'CoreWeave' Distress Shock Unlikely to Spread to Big Tech" [Weekend Money]](http://www.asiae.co.kr/news/img_view.htm?img=2026101514402062239_1792042820.png)
According to iM Securities, as the effects of high interest rates have begun to fuel credit risks at some AI companies, CoreWeave’s credit default swap (CDS) premium hit a record high of 1,117 basis points (1 bp = 0.01 percentage point) as of the close on October 14. The price of CoreWeave’s corporate bonds, which carry a coupon rate of 9.625%, plunged more than 20% below face value to around $77 per $100 of face value, entering distressed territory.
The assessment is that the massive profits being generated by hyperscalers make it unlikely that corporate debt will trigger credit risks on the scale seen in the past. However, the possibility that funding risks at some small and midsize companies could materialize means the market may change its previously positive view of the AI cycle.
Ultimately, the key factor is the direction of interest rates. September’s core consumer price index (CPI) inflation rate exceeded market expectations by 0.1 percentage point, heightening concerns about the pass-through of inflationary pressures and uncertainty over when the Fed’s rate-hiking cycle will end.
Hot Picks Today
"Once Worth 4 Million Won a Day, Now Going for Chicken Money"... Chinese Robots' Humiliating Fall to 'Bargain-Bin' Prices in Just One Year
- "Who Says It's a Meal for Ordinary People? It Deserves 'Special Dish' Status Now"... The Era of 12,000-Won Bibimbap
- "I will open fire at a childcare center"... Australian man in his 20s arrested over AI chatbot conversation
- Daughter in Her 30s Ate Tteokbokki Alone... 34-kg Father Dies of Malnutrition
- "I Won't Take It Even If You Leave It to Me"... 9 Million Parents' Homes Sit Empty as 320,000 Japanese Renounce Inheritances
Park Sang-hyun, a researcher at iM Securities, said, "If the current high-interest-rate environment persists, AI-related credit risks will naturally become increasingly evident. However, if interest rates stabilize at lower levels, AI-related credit risks could ease again, as private-market risks did after emerging last year and early this year. In this respect, the future trajectory of consumer prices and, consequently, when the U.S. Federal Reserve’s rate-hiking cycle will end have become even more important."
© The Asia Business Daily. All rights reserved. Unauthorized AI training and use prohibited.
