- However, D.A. Davidson analyst Gil Luria, who has referred to CoreWeave as “the subprime tranche” of AI, warned on a podcast that the stock could go to zero if the AI funding boom falters and the company becomes unable to pay its expensive debt obligations.
- Luria told Bloomberg Television on Wednesday that CoreWeave was “destroying value at every turn” by borrowing at such elevated rates.
- “If CoreWeave is borrowing at 9% and the best return they can get off of that is a 5% return, it doesn’t matter how much they scale,” he said.
- “Borrowing at very high interest rates in order to build data centers that are increasingly commoditized outside of the hyperscalers may not end up being a good investment,” he continued. “The more leverage we use to build data centers, the more risk we’re bringing into the system.”
Monitor CoreWeave equity and debt pricing to understand where we are in the AI capital bubble cycle.
Does it really matter to the big players? Aren’t they betting on AI providing super intelligence and therefore providing larger returns than the rates at which they can borrow?
Similar stuff happened with the unsustainable computer-leasing mania of the late 1960s. The president had to get involved so that they would stop borrowing more and more cash. I don’t think they really can stop borrowing if other competitors keep throwing cash on the AI build out. No one wants to be left behind and therefore will continue borrowing - even with the rising rates.
Think of it more in terms of market cap. Google is worth 4.3 trillion dollars. They're spending on AI to protect that and others are spending on AI in the hopes of becoming that. The golden goose is serving ads and the fight is over who gets to do that.
I'm of the belief that the Fed raising rates won't do much at all. There's no reason to believe that raising rates will combat inflation coming from oil prices that fluctuate based on tweets and bombing, and it seems that at this point Coreweave is dealing with high interest rates not from the Fed raising rates, but because the market is waking up and realizing that there's a hell of a lot of hype in datacenters and that risk hasn't been priced accordingly.
The way I see it it's the other way around, rates need to be raised to adjust to the situation. If the actual yield of treasuries is higher than the rates set by the fed due to AI bonds flooding the market and investors requiring more pay from countries running a 5% deficit While in a boom cycle AND strong economy AND high inflation both with and without energy and food in the accounting then the fed just has to hike to not lose their credibility.
Now, I don't expect them to hike too much beyond what the markets price 1-2yr bonds at, that would, like you say do nothing as a lot of inflation comes from the oil disruption.
This article is fairly standard financial news boilerplate. "Market selloff, thesis is being tested" is an article that gets printed roughly twice a week regardless of what is going on, and is a template that's been run thousands of times.
An interesting difference between the AI boom and the dot com boom is that back then companies would IPO to raise capital and might have been forced to IPO when they were beyond 500 investors incl employees. These days these companies have already raised capital via private equity and the laws changed which allow them to not count employees with equity and have much higher investor counts. An IPO by either of the frontier labs companies is really a cash-out and payback on the capital they have borrowed. My thinking is the stock price would go down, possibly significantly, after an IPO.
Oracle's credit rating is hovering just above junk bond level. I think the capital agreements are similar to an Adjustable Rate Mortgage and monthly so if there's another rate increase from the Fed and Oracle can't find anyone to buy their bonds and/or their free cash flow continues to be negative then maybe that is a pin-prick in the stock bubble? Its sort of like if you keep bouncing around from 0% credit card offer for 12 months to another and then you stop getting 0% offers, then its time to face the music (those usually have a 3% transaction fee, at least a long time ago they did).
I've been saying for a while now to stay the fuck away from tech IPOs for exactly this reason: it's no longer "we need to raise capital so we can get bigger", it's "we're tapped out on growth, and the last round of private investors needs to be paid back, plus employees need their equity to be worth something in order to stay". Private markets extract all the value and then dump the husk on the public.
When a stock hits the public market, it gets incorporated into broad market index funds (subject to the rules of those funds). If an overvalues stock gets dumped onto the public market, then crashes after being bought by index funds, then holders of those index funds are harmed.
Are there examples of this and quantified losses? The only one I can think of is Nasdaq and SpaceX, but Nasdaq isn’t exactly an index lay people should be investing in, and it isn’t commonly owned anyway (maybe less than 1% own it).
You can get rich by stealing pennies, if you steal them from enough people. It is still wrong, even if no individual lost enough to care about going after you.
If enough people try profiting by stealling pennies, the cumulative losses are significant; and can threaten confidence in and the strenght of the market.
It's been a funny pairing of DotCom boom investors got burned buying paper with no revenue, and now investors complain about companies staying private till there is profit (or cashflow).
Yeah, the modern landscape uses an IPO not as a fundraiser for growth or expansion.
It's a tool to payback original investors, and insiders using public excitement.
This can be seen very easily in the share of startups that the public gets any exposure to, during their growth phase. This has rapidly declined since those policies changed, and almost all growth is now only exposed to private lending markets. By the time a company IPOs now, it's the exit strategy, not the fuel of another growth multiple on the business.
But is it like collector gold coins -- those sell for a premium over their intrinsic gold for numismatic value .
I suspect there people who are betting they can arbitrage them, such as getting an allotment of them and renting them out. (I'm not talking about the scale of a single card in your house, but in DC operators or those who have racks leased already)
No, it's not. GPUs deliver value, real value, compute is the new oil(tm).
But also, it is. You can resell them.
I find it mind boggling that either AI is a bubble or AI is the next industrial revolution and no other options can be considered because reasons(tm).
Token costs are dropping, yes they are, but how much of that is better software and algorithms vs better hardware and that's too galaxy brain for the simpletons trying to predict what's next.
So what's next? IMO more tokens and lots of disappointment that more tokens alone neither cures cancer nor brings the apocalypse and further waves of innovation. AI continues apace.
Daily reminder that the Industrial Revolution was characterized in part by a series of market bubbles that formed in response to the introduction of exciting new technologies.
AI at the edge, i.e. running on your own hardware are going to be the new hotness.
But those data centers? Craters. Wouldn't be surprised if China buys them up for cents on the dollar and run expensive, polluting ops out of them instead of in China.
One thing we know for sure -- A huge portion of the S&P 500 is exposed, the average consumer is pretty tapped for credit, and if people's stock accounts / 401ks go down they naturally retract their spending some. Which means a recession across all but necessities.
Plus loan rates are high meaning rational people either pay less for, or completely avoid buying houses, cars, and all the things that go with (furniture, yard maintenance tools etc)
Great comment. Additional downstream impact is that those who feel wealth (wealthy effect) from an inflated SP500 will no longer feel wealthy and will reduce spend accordingly when a correction occurs, further slowing an economy at stall speed without AI capital investment.
And they will hold on to unrealistically high expectations on the value of their properties.
I was talking to a realtor I bumped into last month, he said that houses are staying on the market longer because sellers don't want to accept the offers they are getting. In some cases people are upside down.
He said he thought up to a 50% "adjustment" in home prices is coming.
Presumably the creditors would then own the DCs. The price to build them is a sunk cost (meaning: not actually a factor in determining what they are now worth), so they would either sell them off for their new value or else run them at market rates.
The big question then becomes: what is the market value of these things. Creditors will eat the difference between that number and whatever they actually lent (less what they've been paid back so far, if anything).
Ed Zitron might be too dismissive of the potential of LLMs but he seems to be the only popular journalist holding the companies accountable for wonky reports on their profitability.
It always seems smart to be a contrarian/bear, but historically, betting against technology and technological progress is dumb.
Not only is he not a shareholder, but based on his opinions, he clearly isn't a user of modern models either. Somehow he still thinks they are party tricks and that "They will never be AGI," with no elaboration on _why_ they _can't_ be AGI, and why that actually matters for these companies (hint: it doesn't really matter much. As it turns out, you could replace a lot of humans with a modern LLM and have a reasonable comparative advantage in doing so, even though the models are ostensibly not "AGI.").
His predictions have also historically just been bad (https://danluu.com/zitron/). Even AI 2027, which is basically semi-fictional, is more accurate and worth paying more attention to than this guy. And the superforecaseters which actually made AI 2027 and actual futurists are generally higher signal.
Not being a 'party trick' and being 'AGI' are wildly different assumptions. Apart from AGI being a poorly defined term, I don't see any reason why the LLM methodology has the potential to scale to AGI.
There's other avenues which are probably needed to make the cohesive AGI picture come true, such as World Models. Simply learning from text and being able to generate language is not, in my mind, the end-all-be-all for intelligence.
They are a party trick, provided the party is software development. If your job does not have you sit behind a computer all day, their utility is minimal.
> His predictions have also historically just been bad (https://danluu.com/zitron/). Even AI 2027, which is basically semi-fictional, is more accurate and worth paying more attention to than this guy. And the superforecaseters which actually made AI 2027 and actual futurists are generally higher signal.
As I noted upthread, those predictions don't cover the financial side, which is where a lot of the issues currently are.
Like, LLMs/AI are definitely going to have large impacts, but those impacts will take a long time to materialise (outside of software, and even there we'll need much better tools to make good use of agents), and the financial investment are predicated on near-term returns from the tech that seem wildly implausible to me (and others).
The bunch of crypto miners getting multiple billion dollar valuations should be a clue here that all is probably not well.
And fundamentally, I don't see model building as a very good business. It's incredibly expensive, and it's hard to maintain the margin in a very competitive space. This is probably good for the world, but very bad for the investors into these model companies.
I thinking most people who follow and like Zitron are in it for the AI pessimism, and only some of them care about the financials. He has shifted his focus to the financials, and they are seeing his predictions of failures for these AI and data center companies failures as validation that AI is all hype.
To me the AI stuff is scarily good now, don't see many software jobs holding up for long and other fields will follow, and he might be right about the financials but it doesn't change anything to me the AI is here, getting better and better and is going to take our jobs.
He is arguing financials and companies failing, but his followers see it as AI sucks and is all hype and nothing to worry about.
Idgaf if model building is profitable, the genie is t going back in the bottle and hoping it back in is definitely not the solution
> don't see many software jobs holding up for long
They'll definitely change, but I'd be really surprised if people stopped hiring software engineers/product/data people.
The agents are useful to the extent that you can sense-check them, and that's a big part of what the humans do in this loop.
> the AI is here, getting better and better and is going to take our jobs
As above, I feel it probably won't take software jobs, but the situation in the rest of the economy is far worse. The labs simply cannot get the kind of data that they would need to train the models to do this.
Barring super-intelligence (which I'm not even sure is a coherent construct), I don't see how that happens.
Loads of stuff is gonna change, but it'll take longer than a lot of people around here expect (rather like the Internet did change the world, but the dot com bubble was still a bubble).
It’s hard to argue against what Zitron is focusing on, as it’s just numbers and simple analysis.
What Dan Luu is doing is avoiding the entirety of Zitron’s numbers and analysis (which can’t be refuted) and instead narrowly focusing on “predictions” that one can spin a hundred different ways.
If that’s convincing to the extent that you are dismissing Zitron’s numbers and analysis, you have a major critical thinking problem.
> Posting this nice list of his failed predictions and bad analysis someone put together: https://danluu.com/zitron/
I like both Ed and Dan (for very different reasons), but I note that the financial side isn't really covered by Dan, and that's probably where Ed has been strongest (to the extent that much of the rest of the financial world is now picking up on it).
Though, as time goes on I am increasingly sympathetic to Zitron's take on the potential of LLMs. Because 4 years later it's still just a potential that's perpetually around the corner. Most people I know in meatspace use it rarely, and, outside of coding, the ones who are expected to use it at work tend to resent it.
I'm not sure if I can express how different the dot com boom era was to someone who didn't live through it. America Online kindasorta brought the Web to everyday people's homes around about the beginning of 1995, except that at that time everyday people didn't necessarily even have computers at home. Four years later we were almost living in a different world. Darn near every college student had a computer connected to the Internet in their dorm room. Every office worker had a computer on their desk and conducted at least some of their work in a Web browser. My grandmother was trying to chat me up on instant messages so many times per day that it was starting to get annoying.
It really was quite remarkable. Compared to it, the AI "boom" has been more like a wet diaper fart.
I can’t imagine a machine that solved navier stokes and a bunch of other outstanding problems in math being called “nothing more than a wet diaper fart”
I don’t know if/when AI will ever become indispensable to normies but it’s clearly making a difference in fields that are highly technical.
But that’s not what I said. Even forgetting the straight-up misquote, I think you may have misread the overall intent of the statement. I wasn’t trying to say that GenAI isn’t impactful. I was using colorful language to say that the impact after 4 years pales in comparison to the impact of the Web after 4 years.
The elephant in the room here is that these discussions are still happening at all. In 1999 there was no question of whether the web was going to completely reshape the world, because it already had.
> The elephant in the room here is that these discussions are still happening at all. In 1999 there was no question of whether the web was going to completely reshape the world, because it already had.
I think we're probably more in the early nineties for AI, rather than the late nineties where everyone (for certain values) is getting some value from it.
The tech is definitely going to have a large impact, but the inherent limitations of it (stochastic and expensive) means that we'll need a bunch of downstream tools and deterministic software to make the most of it.
Which means that a lot of "value" is gonna get vaporised before we reach that point.
HTTP was created in '91 and HTML in '93. SMTP in '81. That's 9-19 years before the dotcom boom, depending on how you want to count.
In '93 people were still complaining that computers weren't bringing in productivity improvements (Solow paradox):
> You can see the computer age everywhere but in the productivity statistics.
The big change is that we now (due to the internet and interconnectedness of everyone) learn about the technology much faster than before.
But diffusion through business and population still takes time. Especially if there's a hardware crunch that acts as a brake.
I lived through the dotcom boom era (went online in '93 or so). If you can't compare that change to the magical science fiction we're living through (I can press a button, speak to my computer and tell it to build me a 3d game, then play through it 15 minutes later), I beg to differ.
Future is already here, it's just not evenly distributed (also said in '93, and I believe it's applicable again).
Wouldn't a "correction" be something _all_ AI users (not producers!) celebrate though? That would mean cheaper hardware and access to open models. The dotcom bubble keeps being compared, and the present we have now is a result of that post-dotcom bubble!
So I don't understand why there's fear and disagreement over a correction. Both sides should welcome it as there is some benefit to everyone. Well, most of everyone.
I am mildly invested ( figuratively and literally so take my next words with that in mind ) in the outcome and raised rates are certainly a possible outcome ( and oddly, one I was suggesting for the longest time is all but inevitable ), but, and it is not a small but, there is a reason those data centers are being built that that reason did not change much. I am just sayin'.
actually, because AI is the only industry that can monetize so high, interest rates will go up and all other companies except for AI will be hit. Change in traditional economics, humans can't understand exponential tech.
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[ 0.24 ms ] story [ 15.7 ms ] threadUS Producer Prices Up Most Since 2022 as Energy Pain Worsens - https://www.bloomberg.com/news/articles/2026-10-15/us-produc... - October 15th, 2026
CoreWeave's Bonds Turn Distressed, Drawing 'Yikes' from Musk - https://news.ycombinator.com/item?id=50090791 - October 2026
- However, D.A. Davidson analyst Gil Luria, who has referred to CoreWeave as “the subprime tranche” of AI, warned on a podcast that the stock could go to zero if the AI funding boom falters and the company becomes unable to pay its expensive debt obligations.
- Luria told Bloomberg Television on Wednesday that CoreWeave was “destroying value at every turn” by borrowing at such elevated rates.
- “If CoreWeave is borrowing at 9% and the best return they can get off of that is a 5% return, it doesn’t matter how much they scale,” he said.
- “Borrowing at very high interest rates in order to build data centers that are increasingly commoditized outside of the hyperscalers may not end up being a good investment,” he continued. “The more leverage we use to build data centers, the more risk we’re bringing into the system.”
Monitor CoreWeave equity and debt pricing to understand where we are in the AI capital bubble cycle.
Similar stuff happened with the unsustainable computer-leasing mania of the late 1960s. The president had to get involved so that they would stop borrowing more and more cash. I don’t think they really can stop borrowing if other competitors keep throwing cash on the AI build out. No one wants to be left behind and therefore will continue borrowing - even with the rising rates.
It’s a tough situation for the FED to maneuver.
That market is far bigger than the entire ad market put together, because its upper boundary is every dollar the world spends on white-collar payroll.
Now, I don't expect them to hike too much beyond what the markets price 1-2yr bonds at, that would, like you say do nothing as a lot of inflation comes from the oil disruption.
Oracle's credit rating is hovering just above junk bond level. I think the capital agreements are similar to an Adjustable Rate Mortgage and monthly so if there's another rate increase from the Fed and Oracle can't find anyone to buy their bonds and/or their free cash flow continues to be negative then maybe that is a pin-prick in the stock bubble? Its sort of like if you keep bouncing around from 0% credit card offer for 12 months to another and then you stop getting 0% offers, then its time to face the music (those usually have a 3% transaction fee, at least a long time ago they did).
If enough people try profiting by stealling pennies, the cumulative losses are significant; and can threaten confidence in and the strenght of the market.
It's a tool to payback original investors, and insiders using public excitement.
This can be seen very easily in the share of startups that the public gets any exposure to, during their growth phase. This has rapidly declined since those policies changed, and almost all growth is now only exposed to private lending markets. By the time a company IPOs now, it's the exit strategy, not the fuel of another growth multiple on the business.
I suspect there people who are betting they can arbitrage them, such as getting an allotment of them and renting them out. (I'm not talking about the scale of a single card in your house, but in DC operators or those who have racks leased already)
Probably related, china banned imports of the 5090d in may.
- https://videocardz.com/newz/heres-why-rtx-5090-costs-5000-ai...
- https://videocardz.com/newz/inside-chinas-mass-conversion-of...
But also, it is. You can resell them.
I find it mind boggling that either AI is a bubble or AI is the next industrial revolution and no other options can be considered because reasons(tm).
Token costs are dropping, yes they are, but how much of that is better software and algorithms vs better hardware and that's too galaxy brain for the simpletons trying to predict what's next.
So what's next? IMO more tokens and lots of disappointment that more tokens alone neither cures cancer nor brings the apocalypse and further waves of innovation. AI continues apace.
But those data centers? Craters. Wouldn't be surprised if China buys them up for cents on the dollar and run expensive, polluting ops out of them instead of in China.
and then the finance paying workload never materializes?
so they just declare bankruptcy and what society just absorbs it?
Plus loan rates are high meaning rational people either pay less for, or completely avoid buying houses, cars, and all the things that go with (furniture, yard maintenance tools etc)
I was talking to a realtor I bumped into last month, he said that houses are staying on the market longer because sellers don't want to accept the offers they are getting. In some cases people are upside down.
He said he thought up to a 50% "adjustment" in home prices is coming.
But if people start losing their jobs and cant/wont make the payments like in 2008 , could drop hard.
The big question then becomes: what is the market value of these things. Creditors will eat the difference between that number and whatever they actually lent (less what they've been paid back so far, if anything).
Not only is he not a shareholder, but based on his opinions, he clearly isn't a user of modern models either. Somehow he still thinks they are party tricks and that "They will never be AGI," with no elaboration on _why_ they _can't_ be AGI, and why that actually matters for these companies (hint: it doesn't really matter much. As it turns out, you could replace a lot of humans with a modern LLM and have a reasonable comparative advantage in doing so, even though the models are ostensibly not "AGI.").
His predictions have also historically just been bad (https://danluu.com/zitron/). Even AI 2027, which is basically semi-fictional, is more accurate and worth paying more attention to than this guy. And the superforecaseters which actually made AI 2027 and actual futurists are generally higher signal.
There's other avenues which are probably needed to make the cohesive AGI picture come true, such as World Models. Simply learning from text and being able to generate language is not, in my mind, the end-all-be-all for intelligence.
There are a bunch of ways that AI the technology could be massivly successful, while AI the industry crashes.
As I noted upthread, those predictions don't cover the financial side, which is where a lot of the issues currently are.
Like, LLMs/AI are definitely going to have large impacts, but those impacts will take a long time to materialise (outside of software, and even there we'll need much better tools to make good use of agents), and the financial investment are predicated on near-term returns from the tech that seem wildly implausible to me (and others).
The bunch of crypto miners getting multiple billion dollar valuations should be a clue here that all is probably not well.
And fundamentally, I don't see model building as a very good business. It's incredibly expensive, and it's hard to maintain the margin in a very competitive space. This is probably good for the world, but very bad for the investors into these model companies.
To me the AI stuff is scarily good now, don't see many software jobs holding up for long and other fields will follow, and he might be right about the financials but it doesn't change anything to me the AI is here, getting better and better and is going to take our jobs.
He is arguing financials and companies failing, but his followers see it as AI sucks and is all hype and nothing to worry about.
Idgaf if model building is profitable, the genie is t going back in the bottle and hoping it back in is definitely not the solution
They'll definitely change, but I'd be really surprised if people stopped hiring software engineers/product/data people.
The agents are useful to the extent that you can sense-check them, and that's a big part of what the humans do in this loop.
> the AI is here, getting better and better and is going to take our jobs
As above, I feel it probably won't take software jobs, but the situation in the rest of the economy is far worse. The labs simply cannot get the kind of data that they would need to train the models to do this.
Barring super-intelligence (which I'm not even sure is a coherent construct), I don't see how that happens.
Loads of stuff is gonna change, but it'll take longer than a lot of people around here expect (rather like the Internet did change the world, but the dot com bubble was still a bubble).
Posting this nice list of his failed predictions and bad analysis someone put together: https://danluu.com/zitron/
I think he's a broken clock that's right twice a day.
What Dan Luu is doing is avoiding the entirety of Zitron’s numbers and analysis (which can’t be refuted) and instead narrowly focusing on “predictions” that one can spin a hundred different ways.
If that’s convincing to the extent that you are dismissing Zitron’s numbers and analysis, you have a major critical thinking problem.
I like both Ed and Dan (for very different reasons), but I note that the financial side isn't really covered by Dan, and that's probably where Ed has been strongest (to the extent that much of the rest of the financial world is now picking up on it).
I'm not sure if I can express how different the dot com boom era was to someone who didn't live through it. America Online kindasorta brought the Web to everyday people's homes around about the beginning of 1995, except that at that time everyday people didn't necessarily even have computers at home. Four years later we were almost living in a different world. Darn near every college student had a computer connected to the Internet in their dorm room. Every office worker had a computer on their desk and conducted at least some of their work in a Web browser. My grandmother was trying to chat me up on instant messages so many times per day that it was starting to get annoying.
It really was quite remarkable. Compared to it, the AI "boom" has been more like a wet diaper fart.
I don’t know if/when AI will ever become indispensable to normies but it’s clearly making a difference in fields that are highly technical.
The elephant in the room here is that these discussions are still happening at all. In 1999 there was no question of whether the web was going to completely reshape the world, because it already had.
I think we're probably more in the early nineties for AI, rather than the late nineties where everyone (for certain values) is getting some value from it.
The tech is definitely going to have a large impact, but the inherent limitations of it (stochastic and expensive) means that we'll need a bunch of downstream tools and deterministic software to make the most of it.
Which means that a lot of "value" is gonna get vaporised before we reach that point.
In '93 people were still complaining that computers weren't bringing in productivity improvements (Solow paradox):
> You can see the computer age everywhere but in the productivity statistics.
The big change is that we now (due to the internet and interconnectedness of everyone) learn about the technology much faster than before.
But diffusion through business and population still takes time. Especially if there's a hardware crunch that acts as a brake.
I lived through the dotcom boom era (went online in '93 or so). If you can't compare that change to the magical science fiction we're living through (I can press a button, speak to my computer and tell it to build me a 3d game, then play through it 15 minutes later), I beg to differ.
Future is already here, it's just not evenly distributed (also said in '93, and I believe it's applicable again).
So I don't understand why there's fear and disagreement over a correction. Both sides should welcome it as there is some benefit to everyone. Well, most of everyone.
What, exactly, are you just sayin'? Cause I'm having a stroke trying to parse your comment lol