Applied Digital secured $1.59 billion in high-yield bonds for CoreWeave’s Polaris Forge 1 expansion at a 7% yield, marking a significant decrease from the 10% yields seen six months ago and reflecting a marked credit risk improvement in the AI data center sector.
- CoreWeave’s bond yields fell from 10% to 7% in recent months.
- CoreWeave’s revenue surged 168% in 2025 to $5.13 billion with a $66 billion backlog.
- AI data center junk bond issuance surpassed $30 billion in 2026, indicating growing market confidence.
What happened
Applied Digital raised $1.59 billion through a high-yield bond sale priced to yield 7%, down steeply from the 10% demanded just six months ago. These bonds will fund the addition of a fourth building at the Polaris Forge 1 campus in North Dakota, providing 150 megawatts of compute capacity under a 15-year lease to CoreWeave. The sale attracted demand five times the offered amount, underscoring strong investor appetite.
Credit default swap spreads on CoreWeave debt fell by 49% from their December peak, signaling a sharp reduction in perceived default risk. This pricing improvement narrowed the yield gap between CoreWeave bonds and those linked to hyperscalers such as Amazon and Alphabet, indicating CoreWeave’s credit profile is now viewed more favorably by the market.
Why it matters
CoreWeave’s improved credit metrics reflect robust business growth and strategic partnerships. Its portfolio includes large contracts such as Meta’s $21 billion AI cloud capacity commitment through 2032, and Nvidia’s $2 billion investment to expand AI infrastructure. The company’s revenue growth was 168% in 2025, reaching $5.13 billion, with forecasts exceeding $12 billion for 2026 and a contracted backlog surpassing $66 billion.
The broader AI data center sector is experiencing unprecedented capital market activity, with issuers raising about $30 billion in high-yield bonds this year. Declining yields across these offerings suggest growing investor confidence in AI infrastructure as a viable asset class, despite the high leverage and speculative-grade ratings typical in this emerging market.
What to watch next
Monitoring CoreWeave’s ability to continue converting its significant contracted backlog into deployed infrastructure and long-term revenue will be key to sustaining credit market trust. The single large tenant concentration at Polaris Forge creates some risk if CoreWeave’s financial position weakens, potentially impacting bond revenue streams.
Market observers should also track how broader macroeconomic and credit conditions influence AI data center debt pricing. Whether the rapid growth in AI infrastructure junk bonds represents prudent finance or signs of a developing credit cycle remains uncertain and will be an important factor for investors evaluating risk in this fast-evolving sector.