U.S. Treasury Secretary Scott Bessent stated that rising debt yields in the artificial intelligence (AI) sector are not a concern, describing neocloud companies as a minor part of the broader market. This statement follows recent declines in the stock and bond prices of neocloud provider CoreWeave Inc. (NASDAQ:CRWV).
No Concern Over Tech Borrowing
Speaking with CNBC’s Brian Sullivan on Wednesday, Bessent addressed questions regarding double-digit yields on AI-related debt. Sullivan asked if the Treasury Secretary was worried about the lower end of the credit spectrum.
“Look, we, we monitor all of this,” Bessent told CNBC. “I don’t think it’s problematic at all because, you know, we’re seeing that the neo-clouds are a small component of the overall ecosystem.”
Bessent further noted that capital continues to flow into the technology sector despite rising borrowing costs. “And we’re still seeing the financing getting done. We’re still seeing the deals get done,” Bessent said. He added that some companies, such as Meta Platforms Inc. (NASDAQ:META), are choosing to “finance with equity.”
CoreWeave Debt Pressures
Bessent’s comments occurred alongside mounting financial pressure on CoreWeave, an Nvidia Corp. (NASDAQ:NVDA)-backed neocloud company. According to last week’s report, the yield on CoreWeave’s $2.75 billion bond maturing in 2031 rose to a record 15.76%.
Shares of CoreWeave have declined about 44% in the past six months. The stock fell about 6.92% to $59.50 premarket on Thursday.
Broader Economic Outlook
During the CNBC interview, Bessent also discussed the broader U.S. economy and the Federal Reserve’s recent decision to leave interest rates unchanged. Bessent expressed his support for Federal Reserve Chair Kevin Warsh.
“I have great confidence in him to find the right balance between the Fed’s dual mandate of full employment and the inflation mandate,” Bessent stated.
While Bessent said the U.S. is currently experiencing an “energy supply shock,” he maintained a positive outlook on immediate economic growth. “I think we’re going to get a strong GDP number for the third quarter,” Bessent said.
How Has the Stock Market Performed?
The S&P 500 index has advanced 13.13% year-to-date. Similarly, the Nasdaq Composite index was up 14.23%, and the Dow Jones gained 9.18% YTD.
On Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed higher. SPY rose 0.34% to $772.31, while QQQ advanced 0.60% to $725.61. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), ended 0.27% higher at $524.68.
In premarket trading on Thursday, SPY was down 0.47%, QQQ declined 1.26%, and DIA was 0.39% lower.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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