📰 What happened with CoreWeave



  • CoreWeave announced that it will issue US$ 2.000 million in 'convertible senior notes' maturing in 2031. There is also an option (greenshoe) to expand up to US$ 2.300 million.

  • The obligations will accrue interest (according to reports between 1.5% and 2%) and may be converted into common shares of CoreWeave under certain conversion terms.

  • Following the announcement, shares dropped sharply — reports indicate a decline of around 7%–8%.

  • The company said that part of the funds will be used for 'general corporate purposes' and also for operations such as 'capped call transactions' — mechanisms that companies sometimes use to mitigate the dilutive impact of convertible debt.


In other words: CoreWeave is raising a significant amount of capital through convertible debt — a form of financing that offers liquidity now, at the cost of potential future dilution for existing shareholders.


#CoreWeave

✅ Why they do it — what justifies the issuance of convertible debt


The company explains — and many analysts agree — that there are reasons to seek extra capital:



  • CoreWeave has gone through an intense investment phase in infrastructure in 2025 — especially focused on AI computing, expansion of data centers, acquisition of hardware, etc. To sustain that pace, they need fresh capital.

  • Using convertible debt instead of issuing shares directly may be less dilutive — at least initially — and may offer better financing conditions (lower cost than traditional debt, if the conversion terms turn out to be favorable for the company).

  • According to their statement, the guarantee of the notes comes from subsidiaries and assets of the company, which from their point of view allows securing the debt while expanding operations.


In that sense, the move seeks to provide capital to scale operations in AI/cloud without immediately resorting to issuing new shares — a strategy that may make sense if they believe that their growth will justify a higher valuation in the future.


#DebtStorm

⚠️ Why the market reacted negatively — risks and uncertainties


But the drop in price reflects several concerns from investors:


  • 📉 Potential dilution:The notes are convertible into shares. If investors convert, the number of shares will increase — which dilutes current shareholders. This possibility usually causes the price to drop at the announcement.

  • 📊 Increase in leverage / significant debt:CoreWeave already has a considerable debt load (several billion), and adding more debt creates financial risk: higher interest payments, cash pressure, risk in case of a slowdown.

  • 🏗️ Dependence on expansion working:The growth thesis (AI, data centers, computing demand) must materialize. If AI demand decreases or competition intensifies, the cost of debt + dilution could be a significant burden.

  • ⚠️ Perception of elevated risk: The combination of high debt + potential dilution causes many investors to reduce their exposure — at least until they see concrete operational results.


That's why the price reacted by going down: the market is discounting that today there is a higher risk cost.


#RiskAnalysis

📈 What can happen in the medium / long term? Two scenarios for CoreWeave


🔹 Possible Scenario (optimistic)


  • If the demand for AI and cloud services continues to grow, CoreWeave could expand its infrastructure, take on large contracts, and improve recurring revenues.

  • If the business scales well, the convertible notes could convert into shares when the price is high — benefiting both new and old investors.

  • The financing allows them to maintain liquidity now, invest in growth, and possibly become a 'backbone infrastructure' for global AI — which could justify a much higher valuation in the future.


🔸 Risky Scenario (pessimistic)


  • If the costs of debt, interest, or capital expenditures exceed revenues, the company could face cash flow problems.

  • If the conversion of debt results in massive dilution, current shareholders could see their stake lose real value, even if the company grows.

  • If the AI/cloud market cools down or there is strong competition, demand may not justify expansion — which would leave CoreWeave with high leverage and lower returns.