Episode summary
Tech Stocks and AI Bonds Are Tumbling. Is the AI Trade in Trouble? | WSJ’s Take On the Week
The Journal
· · Hosts: Miriam Gottfried, Telis Demos · Guests: Asa Fitch
Summary
AI-related credit markets have become the main worry as tech stocks soften, but the conversation argues that the selloff is more about financing conditions than a sudden collapse in AI demand. The hosts point to CoreWeave bonds, SpaceX needing more capital, and Anthropic’s filing as signs that investors are rethinking how expensive the AI build-out will be, not abandoning it.
Asa Fitch explains that CoreWeave is a highly leveraged “neo cloud” that rents out computing power and has become a kind of stress test for the sector. He says there has not been a clear ebbing of demand for AI computing power, but the market is pricing in concerns about rising borrowing costs, heavy debt loads, and business models that depend on cheap capital. By contrast, he argues that hyperscalers like Google, Amazon, Microsoft, and Meta have more diversified businesses and can absorb AI missteps more easily.
The episode also frames Nvidia as dependent on CoreWeave and similar customers because they provide a large outlet for its chips, even as Nvidia’s own circular financing deals raise questions. Still, Fitch says there is no clear evidence that the AI boom is turning into a bust; the more likely issue is that investors are becoming more selective about which AI bets deserve funding and at what price.
Key takeaways
- Asa Fitch says there is no clear sign that AI demand is fading; the pressure is coming from financing and interest rates.
- CoreWeave’s heavily indebted model makes it a barometer for sentiment toward the most leveraged AI infrastructure plays.
- Fitch says Nvidia needs CoreWeave and other neo clouds as customers because big tech firms are also trying to make their own chips.
- The hosts argue the market is becoming more selective, not anti-AI, as investors separate lower-risk credit from riskier AI structures.
- Fitch says the next big test is whether companies like Anthropic and Meta can still raise huge amounts of capital at acceptable prices.
Notable quotes
“there hasn't really been an a clear ebbing of demand for computing power for AI”
“CoreWeave is a company that's executing a financing model”
“Nvidia needs Coreweave. And they do”
“There's nothing fundamentally that here that that says the AI boom is turning to a bust today”
“capital is king, right? I mean, the capital window is is wide open”
How the episode opens
There's nothing fundamentally that here that that says the AI boom is turning to a bust today, you know, even though the bond prices are going down and the share price is going down. — Hi Miriam. — Hi Tallis.
So, it's been a tough couple of weeks, I'd say, in the markets for AI. And I think that the focus has really turned to what's going on on the credit side of AI. We've been talking about AI stocks, obviously, on this show and everywhere for quite a long time.
But the focus has really shifted, I think, to the to the to the money being raised in the bond markets and the loan markets, the the the borrowing that needs to happen for this AI build-out. And you started to see it a couple of weeks ago when a bunch of AI bonds, in particular, bonds of a company called Coreweave, sold off pretty sharply. And you've continued to see it.
I mean, SpaceX reported earnings the previous week. Um they showed a profit. That was good.
Their stock went up a little bit. But then they started talking about how they need to raise even more money to pursue a business that is sort of like that of Coreweave, which we'll explain what that all is in a moment.
Investors started to get nervous again. — And then investors got nervous again and sold off the stock. So, I don't know. It seems like as all these AI companies are now reporting earnings, uh I don't think the market's in a very receptive mood.
No. And then we also have, of course, Anthropic having filed its S-1, its prospectus to go public. And, you know, of all eyes are on that, but kind of lurking in the background are these fears around what is it going to take to finance this infrastructure that still has yet to be built.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai credit markets
- ai bonds
- tech stock selloff
- compute infrastructure financing
- interest rates and fed policy
Companies and tickers mentioned
- AMZN
- META
- GOOGL
- GOOG
- BX
- NVDA
- Amazon
- Meta
- Alphabet
- Blackstone
- CoreWeave
- Nvidia
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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