The AI ‘credit card’ is getting costlier as CoreWeave bond yield tops 16%

Debt markets are sending a message to AI data center builders: we're hiking the interest rate on your credit card and may put some new curbs on your credit limit.

That analogy comes courtesy of Jefferies global head of equity strategy, Christopher Wood, who put it in a note on Friday: "The most plausible way the AI capex arms race will end is that the credit card will be taken away."

That isn't happening yet, but credit markets have been spooked by the new political landscape — seeing more hurdles to data centers under Democratic governors in key states, along with a Democratic-controlled Congress.

The poster child for debt stress is neocloud Coreweave . The yield on its 2032 bond with a 9.625% coupon has climbed above 16%. Corweave's five-year credit default swaps spiked above 1,289 basis points on Thursday, widening above their October peak, according to Deutsche Bank. The CDS eased 8% Friday to around 1,155.

"We've had plenty of warnings from the credit space," said Jim Reid, Deutsche Bank's global head of macro and thematic research, in a note on Friday. Debt and equities are now moving more in sync, he added, "so we'll have to see if credit goes any further."

Investors are demanding more compensation to insure against default among even companies with the strongest balance sheets and credit ratings, including Nvidia , Broadcom , and Amazon.com .

CDS on Nvidia debt is up 76% in the last month. Broadcom's CDS is up 49%, while Amazon's has gained 44%. Their CDS remain low on an absolute basis; Nvidia's spread stood at roughly 139 basis points, compared with about 298 bps for Oracle and roughly 1,100 for CoreWeave. A large increase from a low starting point does not imply the same credit risk.

Still, rising CDS are a sign that markets want more protection against default among even the largest and healthiest debt issuers. And rising CDS imply higher financing costs down the line.

The market is now grappling with the prospect that at least some data center spending will be delayed or scrapped under incoming Democratic governors in Ohio, Texas, and Georgia, the three states with much of the planned capacity.