Macro commentary by etoro analyst for Romania, Bogdan Maioreanu
Tech Selloff Puts in Focus the Cost of the AI Rally
The technology heavy Nasdaq 100 index fell 5.5% last week. CoreWeave, a company specializing in cloud computing and AI infrastructure, whose share price nearly doubled between January and early May, saw a big portion of its gains wiped out last week, losing almost 24%. Meanwhile, a warning also emerged from the bond market. Some of CoreWeave bond yields reached around 15%, with investors demanding roughly 10 percentage points above US Treasury yields to hold the AI computing provider’s debt. The technology selloff brought a difficult question into focus: how much will it cost to keep financing the artificial intelligence rally?
The bond market starts to show investors that strong demand alone might not be enough. Growth also needs affordable financing. For now, higher bond yields do not change CoreWeave’s existing fixed-rate interest payments. They do, however, suggest that its next round of borrowing could be substantially more expensive. For a business, buying computing equipment and leasing data centres to expand rapidly, that matters. Higher interest costs leave less cash for investment, while issuing new shares can dilute existing investors. For investors, the question might not simply be whether AI demand will grow, but whether companies can fund the infrastructure needed to meet it while delivering attractive returns.
CoreWeave bonds are already rated below investment grade, but financing questions also extend to larger technology companies. By example, Oracle’s AI expansion requires substantial investment. For now, the company debt remains investment grade, although Moody’s has a negative outlook and S&P rates it one notch above junk grade. A downgrade is not inevitable. Investors nevertheless need to assess how customer orders translate into cash after infrastructure spending and interest payments.
Oracle’s position in the S&P 500 index also means its share-price performance affects index investors. The broader risk is that similar concerns spread across other large technology holdings. Financing pressure can travel through the AI supply chain. CoreWeave buys Nvidia-powered equipment and rents facilities from companies including Applied Digital and Core Scientific. Slower expansion could therefore affect equipment orders, rental income, and construction activity.
Different contracts and financial protections mean these companies would not necessarily suffer equally. But owning a chipmaker, a cloud provider and a data-centre developer can still leave a portfolio dependent on the same spending budgets. This is why earnings reports now need to demonstrate that AI spending supports profitable growth. Investors should be particularly attentive to cash flow after capital expenditure, changes to investment budgets and management’s financing plans.
The previous earnings season showed us that bigger spending announcements alone are not enough to lift shares. Companies need to present a credible route from investment to cash returns. Profitable technology leaders with strong balance sheets remain better positioned, but financial strength does not make every valuation attractive. This earnings season, investors might focus on understanding whether companies can fund their investment plans without repeated fundraising, examine how a slower AI infrastructure development could affect earnings, and check how much of their portfolio depends on the same customers and spending budgets.
Among individual investors, the interest in technology and AI remains elevated as is shown by the etoro Retail Investor Beat survey, with 20% of investors at the global level (and 18% of Romanian investors) stating that they are most likely to increase their investments in technology. While market conditions call for heightened caution, a bond-market warning isn’t an automatic sell signal. Strong earnings and accessible funding could still stabilize sentiment. The greater concern would be weaker cash generation arriving just as refinancing becomes harder. This is why investors might want to look very closely at the distinction between companies that can comfortably finance expansion and those whose growth depends on continued access to fresh capital. And this element might shape the market in the next period.
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Notes to editors
Bogdan Maioreanu, etoro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania, among others. Bogdan is an Executive MBA from Asebuss and Washington University.
