The Fed Just Raised Rates for the First Time Since 2023. CoreWeave’s CEO Sees an ‘Inflection Point,’ But Its $51 Billion Debt Problem Just Got Worse.

The Fed Just Raised Rates for the First Time Since 2023. CoreWeave’s CEO Sees an ‘Inflection Point,’ But Its $51 Billion Debt Problem Just Got Worse.

• CRWV
• NVDA

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The Federal Reserve just raised interest rates for the first time since 2023, lifting its target range to 3.75% to 4%. It also hinted another increase could follow. For most companies, a quarter-point move isn't a massive concern. But for CoreWeave (CRWV), even a small increase matters because it presses on the firm's weakest point.

​CoreWeave's whole model runs on debt. It borrows heavily to buy Nvidia (NVDA) chips and build data centers, then rents out that computing power. The business is growing fast, with revenue up 112% last quarter. The problem is the cost of that growth. CoreWeave carries more than $51 billion in debt, which is more than its market cap itself. Its interest bill now runs higher than its operating income. Its CFO recently described the build-out as funded through debt, customer prepayments, and other capital.

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​Higher rates make new borrowing pricier, and CoreWeave has to keep borrowing to keep growing. Its recent debt already carried interest rates around 9%. So every rate increase raises the cost of the next data center. Investors are growing nervous, and the market shows it. The perceived risk that CoreWeave can't pay its debts has climbed sharply. Insider selling, including share sales filed by the CEO, has added to the unease.

The Gap With Nebius Just Widened

This is precisely why I've preferred Nebius (NBIS) over CoreWeave. As I wrote when both firms last reported, the two play in the same AI cloud market, but their balance sheets aren't close. Nebius carries roughly $2 billion in net debt against CoreWeave's $46 billion. It also covers much of its spending through customer prepayments rather than fresh borrowing. An increased rate barely touches that model. CoreWeave gets punished much worse.

​CoreWeave does have its strengths, though. It holds a backlog worth over $100 billion and just raised its guidance. So this isn't a company that is about to collapse. But the rate hike widens a gap that was already there. CoreWeave now has to find its way out of a debt load that just got even more expensive to carry.

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