CoreWeave Jumps 26.5% and Drags AI Stocks Back From the Brink

CoreWeave shares leaped 26.5 percent on Wednesday after the AI cloud provider reported a smaller-than-expected quarterly loss and raised its full-year revenue forecast, pulling the broader AI sector out of its recent slump. The S&P 500 rose 1.6 percent and the Nasdaq composite rallied 2.2 percent, with the S&P on track for its third gain in four days since last week's wipeout on fears of an AI slowdown.

The Dow Jones Industrial Average was up 243 points, or 0.5 percent, as of 1:38 p.m. Eastern time. Stocks outside of AI had more modest gains, and only slightly more stocks within the S&P 500 rose than fell.

Why CoreWeave's report matters so much

CoreWeave rents out access to AI chips to customers over the cloud, which puts it at the center of the industry's manic recent swings. Two worries have been dogging the company and its peers. The first is money: higher interest rates in the bond market make borrowing more expensive, and investors have questioned whether capital-hungry AI infrastructure companies can keep funding themselves.

CoreWeave's answer came from CEO Michael Intrator, who said the company has roughly $9 billion in customer prepayments and deposits expected over the next three months, along with other sources of cash to help pay its bills. That led some analysts to say the company is making progress toward being able to self-fund its business. In plain terms: customers are paying upfront, and that cash covers the bills.

The second worry is demand. Longstanding doubts about whether AI will produce enough profit and productivity to justify its expensive investments sharpened after sweeping Democratic victories in last week's U.S. midterm elections. The concern, as analysts see it, is that Democratic control of statehouses across the country could lead to restrictions on building new AI data centers and on the industry broadly.

CoreWeave pushed back on that narrative, at least for one day, by raising its revenue forecast for the year to a number higher than analysts expected. One earnings report doesn't settle the debate, but it bought the sector some breathing room.

The chipmakers clawed back losses

CoreWeave's report helped AI stocks across the board recover some of their sharp recent declines:

• Micron Technology, which sells memory for computers, rallied 13.7 percent.
• Broadcom gained 6.2 percent.
• GE Vernova, which helps power AI data centers, rose 2.6 percent.
• Nvidia climbed 5 percent.

Nvidia's move deserves its own footnote. The chipmaker that quickly became the face of the AI boom has been falling recently for reasons unrelated to the rest of the industry. Its board is investigating CEO Jensen Huang after he admitted to a relationship with a businesswoman who allegedly fed intelligence and advanced chips to China.

The takeaway: a single company's cash-flow disclosure was enough to move an entire sector's sentiment in one session.

What happened outside of AI?

Fossil Group soared 26.9 percent after the seller of watches, handbags and other products reported a stronger quarterly profit than analysts expected and raised its revenue forecast for the year.

United Airlines lost 1.3 percent as stocks broadly felt pressure from rising oil prices. Brent crude added 1.8 percent to $93.13 a barrel, recovering some of its losses from earlier in the week. That price sits near the middle of its $72 to $120 range since the war with Iran sent oil much higher early this year.

Higher oil prices tend to push bond yields upward, though the U.S. bond market was closed Wednesday for Veterans Day. The pressure was already visible elsewhere.

Why the Fed is back in the picture

Yields jumped in the bond market the day before following a worse-than-expected reading on U.S. inflation. The discouraging report raised expectations for coming interest-rate hikes by the Federal Reserve.

Higher yields translate into higher mortgage rates, and real-estate companies kept falling Wednesday. Homebuilder PulteGroup sank 1.2 percent, and D.R. Horton fell 1.7 percent.

The takeaway for the AI trade: the same rate pressures that spooked investors about CoreWeave's borrowing costs are still building, Veterans Day holiday or not.

How did markets abroad respond?

Indexes rose across much of Europe and Asia. South Korea's Kospi jumped 2.6 percent, one of the world's biggest moves. Hong Kong's Hang Seng was an outlier, falling 1 percent.

Shanghai stocks rose 0.5 percent as China's biggest online shopping festival, Singles Day, began Wednesday. Its sales data will offer a gauge of how strong spending is in the world's second-largest economy — a separate signal investors will parse for signs of global demand.

What comes next?

Many challenges remain for CoreWeave and for the AI industry broadly, and Wednesday's rally recovered only some of the sector's recent losses. But the company's $9 billion in expected prepayments and its raised revenue forecast gave investors a concrete data point that AI demand, for now, is holding up. Whether that holds through a fresh round of Fed rate hikes, and through state-level scrutiny of data center construction, will define the next leg of this trade.