CoreWeave’s long-term debt interest rate exceeded 16 percent last week, placing the leading neocloud in severe financial stress, while Oracle’s debt yield peaked above 8.5 percent and approached junk territory.

The article notes that roughly 80 percent of OpenAI and Anthropic revenue comes from 1 percent of customers (mostly unprofitable AI startups) and that AI spending showed virtually zero growth in August and September as token prices fell faster than usage rose.

DeepSeek’s latest model is described as matching or exceeding U.S. frontier models at a fraction of the cost, which the author argues undermines the revenue assumptions needed to support trillions of dollars in AI infrastructure lease commitments.

Last week was a minor earthquake in the AI world, and DeepSeek’s latest release could mean an even bigger one this week. Focusing first on last week, CoreWeave, the largest of the neoclouds, is now in the Intensive Care Unit. The interest rate on its long-term debt passed 16 percent. This is a huge deal.

Neoclouds are a big part of the AI infrastructure. They buy and rent out computing capacity to AI users. And in the AI boom, they are heavy borrowers. When they have to pay over 16 percent on the money they borrow (junk bond territory is 8.0 percent), they do not have a terribly viable business model.

And the troubles for the AI industry went far beyond CoreWeave. As I pointed out last week, even the stock market was taking notice.

The bad news from Wednesday carried through for the whole week. Here’s the story for the publicly traded neoclouds, along with Oracle, by far the leading target for collapse among the hyperscalers.

We’re still some distance from zero; all of these companies still have very high market caps, especially for businesses that are losing money hand over fist. But........

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