A seemingly ordinary rainstorm has triggered a market shock in AI infrastructure stocks worth tens of billions of dollars. Data center service provider CoreWeave, Inc. saw its market value evaporate by $33 billion in six weeks, a drop of over 60%. Meanwhile, Broadcom and Oracle both plummeted more than 17% in just three trading days, highlighting growing concerns that the AI bubble is spreading from delayed capital expenditures to the entire supply chain.
The crisis began at a construction site in Denton, Texas. Strong summer rains and winds caused a roughly 60-day delay in the completion of one of CoreWeave’s large AI data center clusters, preventing contractors from pouring concrete as scheduled. The cluster, designed to provide 260 megawatts of computing power and leased to OpenAI, has now been postponed by several months.
Investor panic worsened after CoreWeave CEO Michael Intrator made contradictory statements during the November earnings call. Initially downplaying the issue as affecting "just one data center," he was quickly corrected by the CFO, who clarified that the delay involved "one data center supplier," implying broader disruptions. Following this confusion, CoreWeave’s stock plunged 16.3% in a single day.
The incident exposed systemic risks in the AI infrastructure sector: the widening gap between frenzied construction speeds and actual delivery capabilities, while sky-high valuations have already priced in overly optimistic expectations.
**The Domino Effect of a Rainstorm** Unusually heavy summer rains and winds in northern Texas caused a roughly 60-day delay at CoreWeave’s Denton construction site. The data center cluster is being built by Core Scientific, a former cryptocurrency mining company now among CoreWeave’s largest landlords.
Beyond weather-related setbacks, CoreWeave and its partners also faced additional delays due to design modifications at some Texas data centers. These disruptions pushed back the delivery of a major computing cluster intended for OpenAI by several months.
CoreWeave’s business model relies on high-interest debt to purchase thousands of Nvidia’s advanced AI chips, installing them in server racks leased from third-party landlords before subleasing the computing power to AI firms. This highly leveraged approach is particularly vulnerable to construction delays.
**CEO’s Contradictory Remarks Fuel Panic** During the November 10 earnings call, Intrator initially dismissed concerns, stating that "one data center" was affected and would "catch up." However, CFO Nitin Agrawal corrected him, clarifying that the delay involved "one data center supplier," signaling a broader issue.
Later in the call, Intrator described the delays as a "systemic challenge" frustrating clients, adding that the company was diversifying its construction suppliers to mitigate future disruptions. His inconsistent remarks unsettled investors.
The next day, during a CNBC interview with Jim Cramer, Intrator repeated the "one data center" claim before correcting himself. CoreWeave’s stock dropped 16.3% that day, from $105.61 to $88.39, and continued sliding through December.
**Mounting Debt and Profitability Concerns** D.A. Davidson analyst Gil Luria called CoreWeave’s balance sheet "the ugliest in the tech industry." While quarterly revenue doubled year-over-year to nearly $1.4 billion, the company remained unprofitable, posting a $110 million loss.
Luria noted that CoreWeave’s 4% operating margin falls short of covering half its debt interest payments, raising doubts about future profitability. "Bulls argue scaling will bring profits, but this is already a scaled company—there’s no scaling happening here," he said.
Last week, CoreWeave raised $2.25 billion via convertible bonds, a cheaper financing option than asset-backed loans but one that risks diluting shareholder equity. Its debt-default insurance costs have surged to 7.9 percentage points.
**AI Infrastructure Faces a Crisis of Confidence** CoreWeave’s turmoil reflects broader industry doubts: rapid growth has raised questions about when—and if—massive capital investments will yield healthy profits.
Short-seller Jim Chanos, famed for predicting Enron’s collapse, amplified AI bubble fears by publicly criticizing CoreWeave. In late October, Core Scientific shareholders overwhelmingly rejected CoreWeave’s $9 billion takeover bid after hedge fund Two Seas Capital warned of "significant economic risk" and exposure to CoreWeave’s stock volatility. The failed deal sent CoreWeave’s shares down over 6%.
Delays have spread sector-wide. Oracle and Broadcom both suffered double-digit stock declines after signaling slower-than-expected spending. Broadcom’s three-day 18% drop erased over $300 billion in market value, its worst performance since March 2020. Oracle’s unexpectedly high capital expenditures rattled bond markets, raising borrowing costs for major tech firms.
Two Seas founder Sina Toussi, who holds CoreWeave shares, acknowledged the company’s operational strengths but admitted market sentiment is cautious. Across the industry, construction delays and supply bottlenecks threaten to postpone billions in spending already baked into valuations.
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