CoreWeave Debt Pressures Deepen as HSBC Cuts Earnings Outlook

Rising financing costs and weaker earnings expectations are putting CoreWeave's artificial intelligence infrastructure business under pressure, raising questions about how sustainably the company can fund its expansion. Wall Street analysts examining the company's October 2026 sell-off disagree on its broader implications, with HSBC forecasting substantially weaker earnings while other analysts argue that investor sentiment has exaggerated the risks.

According to CNN's October 20 report, CoreWeave's debt and lease liabilities reached approximately $52 billion in the second quarter, up from roughly $30 billion at the end of 2025. Yields on some of its bonds climbed to 15% last week, signaling heightened concerns about credit risk. The company's shares have fallen approximately 30% during October, according to CNN and Yahoo Finance.

HSBC analyst Abhishek Shukla issued a $39 price target, approximately 34% below the stock's then-current trading level, according to Yahoo Finance. His forecast centers on financing costs and profitability rather than an expected collapse in demand for AI computing.

Shukla expects CoreWeave's 2027 loss per share to be 13.3% greater than analyst estimates. For 2028, 2029, and 2030, he projects earnings per share to fall 53.7%, 70.6%, and 64.3% below consensus estimates, respectively. He also expects net debt to reach $92 billion by the end of 2030, compared with an estimated $46.9 billion at the end of 2026.

Explaining HSBC's earnings projections, Shukla said, "Our 2028-30 non-GAAP EPS estimates are 50-70% below consensus. We expect CoreWeave to earn a long-term non-GAAP operating margin of 15-16% vs management guidance of c25%."

His assessment also identifies expensive borrowing as a constraint on future investment. Higher financing costs could make it more difficult for CoreWeave to expand computing capacity supported by short-term customer contracts.

"We note that yields on CoreWeave's bonds are now in the 14-15% range, suggesting market concerns over credit worthiness. This may hamper the company's ability to finance speculative capacity or capacity that is backed by only short-term contracts. This removes one key upside for the stock, in our opinion. We also note that consensus is assuming a significant reduction in the interest rate that CoreWeave will need to pay on its debt, which seems increasingly unlikely to us," Shukla said.

CoreWeave belongs to the neocloud sector, which rents computing capacity to businesses developing AI technology. According to CNN, rising interest rates and uncertainty about data center construction have increased scrutiny of companies that rely heavily on borrowed money to expand.

Technology research analyst Gil Luria of D.A. Davidson cautioned against treating CoreWeave's financial problems as evidence that the entire AI industry faces an imminent collapse.

"Canary in the coal mine implies that if CoreWeave fails, that the whole ecosystem is going to fall, that the whole AI economy is going to fail. I don't think that's the case," Luria told CNN.

Luria distinguished between the underlying demand for AI computing and financial decisions made by individual companies during a period of rapid expansion.

"The AI economy is full of good behavior and bad behavior," Luria said.

He described CoreWeave's reliance on borrowing as an example of financial risk-taking during the AI investment boom.

"They are a bad apple, but there's other bad apples. They just represent some of this bad behavior."

Luria also identified speculative investment financed with borrowed money as a central concern surrounding CoreWeave's business model.

"funding speculative investments with debt," Luria said.

Separately, Barclays global chairman of research Ajay Rajadhyaksha warned investors against drawing sweeping conclusions from isolated financial disruptions. In a Monday research note, he compared current market concerns with fears that regional bank failures in 2023 would trigger a widespread financial crisis as interest rates rose.

"It was a plausible argument. It was also wrong," Rajadhyaksha wrote.

He applied that historical comparison to current concerns about investment in AI infrastructure.

"Similarly, investors shouldn't extrapolate recent challenges for CoreWeave debt to a view on the entire AI capex cycle," he wrote.

Another development added to investor concerns about the sector's valuations. South Korean AI data center company Elice Group plunged 32% on its trading debut Tuesday, according to CNN, reinforcing questions about the returns investors can expect from AI-related businesses.

Meanwhile, Gartner forecast that consolidation could substantially reshape the neocloud industry by the end of the decade.

"cost pressure and a lack of a differentiating business model will force over 80% of neocloud providers to cease independent operations."

Despite the financial pressure on CoreWeave, Luria said demand for AI services remains the principal factor determining the industry's long-term prospects.

"The only systemic risk to the ecosystem right now, is if people stop using AI and aren't willing to pay for it," Luria said.

He argued that the pace of adoption could postpone the point at which financial weaknesses translate into broader industry problems.

"I actually think that demand for AI is growing so fast that any potential failures are probably down the road."

Luria also warned that excessive borrowing can become a weakness during periods of rapid technological investment.

"Our downfall is always when we take on too much debt," Luria said.

He connected that risk to the financial behavior that can accompany major growth opportunities.

"It's unnecessary, but times of boom and opportunity and frontier end up becoming a form of the Wild West, and bad behavior ensues."

He distinguished those financing risks from the technological potential of artificial intelligence.

"That doesn't mean the growth is wrong or the technology is bad," Luria said.

He added that excessive risk-taking can accompany otherwise significant periods of economic and technological expansion.

"It just means that there's bad behavior that usually follows large growth cycles."

Other market participants remain more optimistic about CoreWeave's ability to recover. Bank of America analyst Tal Liani characterized the stock's decline as largely driven by investor sentiment rather than evidence that the company cannot service its debt.

"This [move in CRWV] is more sentiment driven. This is not about fundamentals. This is not about them not being able to pay for the debt, et cetera.

This is more sentiment driven and the sentiment needs to change. And what's going to happen is, as always, there's going to be a period of concern. And then the fundamentals will kick in, meaning revenues, revenue growth," Liani told Yahoo Finance's Sozzi Unleashed, reiterating his $140 price target.

Broader financing conditions also remain under scrutiny as companies that locked in low borrowing costs during the COVID-19 pandemic face a more expensive credit environment. Bloomberg's October 20 analysis argued that corporate resilience during earlier Federal Reserve rate increases may have obscured vulnerabilities that are becoming more apparent as financing costs rise.

CoreWeave's bond yields and earnings outlook therefore place the company at the center of a wider debate over whether aggressive AI infrastructure spending can generate sufficient returns to support its financing costs.