The Bubble Is Leaking Through the Bond Market

🏗 From The Dirt Up

Real Estate Insights. Success Mindset. One Step at a Time.

Issue #73 | October 18, 2026

CoreWeave lost more than half its value from the high. Its bonds now trade like distressed debt. The All-In crew asked if the AI bubble just popped. Here is what the selloff means for the people who own the dirt underneath it.

🧠 Market Insights

The Bubble Is Leaking Through the Bond Market

CoreWeave had a rough week. The stock fell 15.5 percent on Wednesday, the day a hot inflation report landed. It fell another 12 percent Friday and closed at $61.39. Its 52-week high is $141.79.

The stock is not the real story. The bonds are.

CoreWeave notes due 2031 traded near 80 cents on the dollar this week, yielding north of 15 percent. The cost to insure its debt against default hit a record of about 1,195 basis points on Thursday. By standard market math, that prices better than a 60 percent chance of default inside five years. Read that again.

The reason is simple. CoreWeave carries about $35 billion in debt plus another $16 billion in lease obligations. Most of that lease number is rent. As of its May earnings call, every megawatt CoreWeave ran sat in a building leased from someone else. It burned $5.7 billion of free cash flow last quarter. It plans to spend as much as $39 billion this year. It has never turned a profit. Meanwhile, the 10-year Treasury sits above 5 percent and traders are pricing in a possible Fed hike on October 28.

Expensive money just met a business built on borrowed money.

Here’s the catch: CoreWeave still pays its 9.75 percent coupon. The 15 percent is what a buyer of those bonds demands today. David Sacks made that point on All-In. The damage lands on the next dollar CoreWeave borrows, and it still has to borrow to build contracts it already signed.

Concentration matters too. Three customers made up 36, 26, and 10 percent of second-quarter revenue, per its 10-Q. That is 72 percent from three names.

Did the Bubble Pop?

On the All-In Podcast this week, Ben Horowitz called neoclouds like CoreWeave “Rube Goldberg financial machines.” He said a16z passed on the whole sector because “you can get upside down easily.” Chamath Palihapitiya looked at the default swaps and called it “a coin flip whether they default or not.”

Here’s the other side: demand is not the problem. CoreWeave reported a $104.2 billion revenue backlog at the end of the second quarter. Nvidia agreed to buy any unsold capacity through April 2032. Horowitz said Andy Jassy told him AWS is sold out beyond 2028.

Demand is not what cracked. The financing is.

Horowitz has seen this before. In the dot-com era, the price of bandwidth fell from $1,500 a megabit to $50 in two years. The companies that borrowed to buy it got wiped out.

GPUs carry the same risk. They have real value, and CoreWeave’s chip loans are backed by them. But each new chip generation makes the last one worth less. The bonds now yielding 15 percent are not backed by the chips at all. The GPU lenders get paid first.

Bubble or Not? It Depends Where You Look

The demand looks real. The financing looks stretched. A company that has never turned a profit is funding up to $39 billion of spending this year, much of it with borrowed money. The biggest buyers are stretched too. Bank of America consensus has the combined free cash flow of Amazon, Alphabet, Meta, Microsoft, and Oracle swinging from $191 billion in 2025 to negative $63 billion this year.

Both are true at the same time. That is what makes this hard to call.

Know the Business Above the Dirt

This is not a simple business. The show replayed CEO Mike Intrator explaining what he calls the box. A customer like Meta signs a contract. The contract, the GPUs, and the data center lease all go in the box. The customer pays the box. The box pays the data center, the power bill, and the lenders before CoreWeave sees a dollar. Intrator said the box pays for everything within two and a half years of a five-year deal.

The credit ratings show the difference. CoreWeave’s $8.5 billion GPU loan, backed by its Meta contract, earned an investment-grade A3 rating from Moody’s. Its unsecured bonds trade at 15 percent. Same company. Two very different credit stories, depending on what backs the debt.

Demand can be strong at the top and a deal can still stall in the middle. Horowitz called it a Rube Goldberg machine for a reason.

If you own land these deals want, you need to understand the business sitting on top of it. Who is building? Who is leasing? Who is paying, and with whose money? That is how you decide whether a contract is worth signing.

✨ The Alpha Effect

Zig When the Crowd Zags

Not long ago, the crowd wanted a piece of every AI deal it could find. This week, the same crowd ran for the exits.

Hype and panic come from the same place. Both let the crowd do your thinking for you.

The alpha mindset works differently. It gets quiet when everyone else gets loud. Before it reacts, it asks one question: what is the smart money doing?

This week, the smart money did not move as a herd. Some hedge funds bought CoreWeave bonds for the yield. Others bet against them. Bank of America kept its $140 target on the stock. Nvidia had already agreed to buy any unsold capacity through 2032. Horowitz’s firm passed on the whole sector.

The clearest signal was in the credit market. In June, insuring $1 million of CoreWeave debt cost about $45,000 a year. On Thursday it hit a record $119,500. Someone was paying up for protection while the stock crowd was still arguing about the headlines.

The banks showed their hand too. JPMorgan and Goldman Sachs put together a $5 billion loan for Volta, an AI cloud company building in Norway. They underwrote the $1.3 billion piece tied to the data center lease. The $3.7 billion for about 36,000 Nvidia chips, they left for investors to take. They backed the building. They hedged on the chips.

Different calls. Same process. Each one looked past the headline to the fundamentals. Cash flow. Debt. Who is paying, and for how long.

That is the edge. You do not chase the hype, and you do not run from the panic. You watch the informed money, check it against the numbers, and make your own call.

🚀 One Step at a Time

Action Steps This Week

1. Learn the business above your dirt.

Before you sign a data center contract, map how the deal fits together. Who builds it? Who leases it? Who uses the computing, and how is each layer paid for? If you cannot map it, you do not understand the risk yet.

1. Check the tenant’s credit, and keep checking it.

The developer buying your land may be solid. The tenant it is underwriting may not be. If that tenant is public, look up its credit rating and bond yields. Then pick one credit number, like CoreWeave’s default swaps or Oracle’s, which hit a record 288 basis points this week, and check it every Friday. If it falls, capital is coming back. If stress spreads to bigger names, tighten your terms.

1. Make the deposit go hard sooner.

Tight capital markets bring retrades and walkaways. Ask for nonrefundable deposits that release at set milestones, not one lump at the end of a long feasibility period. A serious buyer can live with it. A shaky one will show you who they are.

Small steps compound. The AI build-out is not over, but the easy money behind it is.

Here’s to building your success, one step at a time...

from the dirt up.

Kris “Dirt Dawg” McGee 🐾

The Dirt Dawg Den