Nvidia's CEO positively assesses CoreWeave's financial standing - the market is concerned about default risks

Nvidia CEO Jensen Huang stated that AI infrastructure provider CoreWeave does not need additional financial support from Nvidia to strengthen its financial position. Despite his optimistic assessment, concerns about the company's potential default risk are growing in the credit market.

"CoreWeave's situation is improving every day. I'm optimistic. The cost of its capital raising is actually decreasing," Huang told Bloomberg at an event held in Stockholm.

However, the company's shares remained under pressure in the stock market. On Thursday, CoreWeave's share price fell by approximately 3%, following a 15% drop in the previous trading session.

The gap between Huang's assessment and credit market signals highlights growing attention to the rapid, debt-financed expansion of AI infrastructure. According to ICE Data Services, the cost of five-year contracts insuring against CoreWeave's debt default rose by 74.5 basis points at one point, reaching a record 1,194.5 basis points. At this price, the market was pricing in more than a 60% probability of the company's default over a five-year period.

CoreWeave has taken on significant debt to expand its computing capacity. Its financing involves suppliers as well, including Nvidia, which raises questions in the market about so-called circular financing. In this model, a supplier financially assists a company in purchasing the equipment that it itself sells.

Nvidia holds approximately a 10% stake in CoreWeave and is the company's second-largest shareholder. In addition, Nvidia also supplies it with computing equipment. Accordingly, Huang's statements take on particular significance as investors assess how much financial risk companies involved in developing AI infrastructure are taking on.

CoreWeave's example shows that as demand for AI infrastructure grows, not only technological capabilities but also the sustainability of financing this expansion are becoming increasingly important.