Key Takeaways
- CoreWeave jumped 7.94% on Oct. 27 after bringing new capacity online in Denmark, and Nebius rose 11.22%. By the Oct. 30 close, CoreWeave had given the gain back at $54.87.
- Atreides Management’s Gavin Baker says GPU rents rose every day in October, but CoreWeave locked much of its capacity into long contracts that now pay far below market.
- CoreWeave pays today’s prices to build and borrow: its total debt, including leases, reached $51.6 billion in June, and its 2032 bonds yielded close to 15% in October.
- Higher rents mostly help operators with free capacity and cheap funding, so CoreWeave’s Nov. 10 report on interest costs and renewals is the next test.
CoreWeave (CRWV) couldn’t hold on to its best day in weeks.
The stock jumped 7.94% to $59.57 on Oct. 27 after CoreWeave brought new capacity online at its first data center in Denmark, and fellow neocloud Nebius Group (NBIS) rose 11.22%. By the Oct. 30 close, CoreWeave was back at $54.87, after Microsoft’s capital spending came in below estimates and tech stocks sold off. That capped an October in which CoreWeave’s 9.625% notes due 2032 fell below 80 cents on the dollar.
The odd part is that GPUs have rarely been harder to rent. As Gavin Baker, managing partner and CIO of Atreides Management, said on TBPN on Oct. 27:
“October has kind of been a strange month because the price to rent, essentially any kind of a GPU, has gone up every day.”
So why isn’t CoreWeave cashing in? Baker had an answer for that too. “CoreWeave is great,” he said. “They just sadly locked in a vast amount of compute” in long-term contracts “that are now way, way under market.”
Ouch.
Yesterday’s Prices, Locked In
Committed contracts made up 98% of CoreWeave’s 2025 revenue, and the average contract, weighted by size, ran about five years at the end of 2025.
Baker says anyone who signed a long-term compute contract before about May 2026 is “way in the money.” CoreWeave sat on the other side of a lot of those deals. And on the second-quarter call in August, CFO Nitin Agrawal said the capacity coming up for renewal is “a very limited part of our fleet.”
Its margins aren’t rising with the market either. CoreWeave’s gross margin peaked at 74.3% in 2024 and slipped to 71.7% in 2025…
…and it fell again this year: cost of revenue took 34.1% of second-quarter revenue, up from 25.8% a year earlier.
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New Clusters Cost a Fortune
Buying future capacity is just as tight. In Baker’s words, “You have to pay a truly vast amount to bring on a cluster in mid to late twenty seven.”
That’s a problem for a company that builds with borrowed money. CoreWeave’s total debt, including leases, went from $2 billion at the end of 2023 to $29.8 billion at the end of 2025…
…and reached $51.6 billion by June 30, $16.5 billion of it lease liabilities.
That money keeps getting more expensive. CoreWeave’s dollar bonds went from a 9.00% coupon in July 2025 to 9.75% in April 2026, and October’s slide pushed the yield on its 9.625% notes due 2032, sold in June, close to 15%. Steve Eisman, the investor made famous by The Big Short, said on Prof G Markets on Oct. 28: “I think it’s prohibitive for them to raise debt at 15% and build AI data centers.”
In the second quarter, depreciation and interest together ate 79% of revenue. For the third quarter, management guided to interest expense of $860 million to $940 million, against adjusted operating income of just $200 million to $260 million.
Analysts don’t expect profits soon, either. They see a normalized loss of $3.99 a share in 2026 and $1.97 in 2027, then a $1.61 profit in 2028:
A year ago, they expected a $2.23 profit in 2027. Estimates have fallen while rents climbed.
Higher Prices Only Help the Next Contract
Fixed prices cut both ways. If new supply pushes rents back down, those long contracts will protect CoreWeave’s revenue.
CoreWeave is adjusting, too. It raised prices about 25% across its GPU lineup in July, and management says contracts signed in the second quarter carry contribution margins 5 to 10 points above recent ones. Baker added that “CoreWeave is very aware of this. They’re trying to get more spot exposure.” Not all of its money is expensive, either: a Meta-backed $8.5 billion loan in March priced at about 5.9% fixed.
But higher prices only apply to new capacity, which costs “a truly vast amount” to build and must be financed in today’s market. Baker hopes the crunch concentrates supply in “the competent operators where they can finance it through prepayments.” That describes Nebius better: about 70% of its second-quarter deals came with prepayments covering 50% to 60% of the capex tied to them.
The Interest Bill CoreWeave Reports on Nov. 10
Rising GPU rents won’t fix CoreWeave while it pays this much for money. Its cheapest loans lean on contracts with customers like Meta, and its unsecured bonds yielded 15% or more in October. Until it can borrow on better terms, the shortage mostly helps CoreWeave’s customers.
There’s one wild card. NVIDIA bought $2 billion of CoreWeave stock at $87.20 a share in January, and Eisman allows that “maybe, you know, NVIDIA will come in and backstop the whole company.”
Barring that, CoreWeave’s third-quarter report on Nov. 10 will show how far interest expense outruns operating income, and whether any renewals are coming in at today’s prices.
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