AI cloud infrastructure stocks took a sharp hit Tuesday. Nebius Group dropped 10%, and CoreWeave sank even further. Credit market concerns—not earnings—triggered the downturn. Both names have led a sharp repricing of highly leveraged AI infrastructure borrowers. NBIS stock is now down 43% over the past month; CRWV down 36%.
The trigger is unmistakable: the credit market. Credit-default-swap costs on AI infrastructure borrowers have surged. Investors question whether the current capital expenditure boom can be financed at reasonable rates. CoreWeave’s CDS topped roughly 855 basis points Tuesday, implying a 50% five-year default probability on a widely used pricing model. The company is junk-rated with negative free cash flow since 2022.
Oracle finds itself caught in the same downdraft. Its CDS sits above 215 basis points, up from about 145 at the end of last year. Torsten Slok, an economist at S. Apollo, warned that rising all-in yields could force the AI capex cycle to “self-throttle.” NVIDIA‘s CDS is also touching a new high, according to reports.
Meanwhile, the First Trust Cloud Computing ETF (NASDAQ:SKYY) tells a nuanced story. Oracle‘s weighting in the fund drags it down, but broad cloud software is holding up. So this looks like a targeted rerating of leveraged buildout names rather than a cloud-wide unwind. An analyst who famously called NVIDIA in 2010 recently named his top 10 AI stocks—Oracle did not make the cut.
The sell-off in AI infrastructure names stands in stark contrast to the broader cloud computing space. While the First Trust Cloud Computing ETF is down, its decline is modest compared to the double-digit drops in Nebius and CoreWeave. This divergence suggests that investors are not fleeing the cloud sector—they are specifically targeting companies with heavy debt loads and negative cash flows.