CoreWeave's stock and bonds were both hit on Wednesday as investor fear grew that some technology companies are borrowing too heavily for the artificial intelligence build-out.

Shares of the so-called neocloud nosedived 15.5%, while yields on its debt jumped higher. The yield to maturity on its 9.625% bond due in 2032 is sitting at 14.8%, while that of its 9.75% bond due in 2031 is around 14.9%. Bond yields move inversely to prices.

CEO Mike Intrator dismissed the market moves in a memo obtained by CNBC.

"When you are building a new type of technology company there will be periods of time when the market misunderstands and acts irrationally," he wrote. "We are confident in our backlog which more than supports all of our debt obligations."

While investors were once excited about getting in on the AI action, investor sentiment has started to shift, said Luis Alvarado, co-head of global fixed income strategy at Wells Fargo Investment Institute.

Now, investors are demanding more risk compensation, he said.

"The era of easy money, which we experienced in the first nine months of the year, is starting to disappear and dissipate," Alvarado noted. "Now the extra dollar or the marginal dollar is going to be more looked at with a microscope into the concessions that the issuer is giving you back."

Tech investor Chamath Palihapitiya, founder and CEO of investment firm Social Capital and CEO of AI company 8090, called out CoreWeave's soaring yields on X late Tuesday. That prompted Tesla and SpaceX CEO Elon Musk to respond, "yikes."

Palihapitiya shared a chart of the 2032 bond, noting that the yield "touched 15%" and then "closed at a new high" on Tuesday. He also included part of his deep dive into whether the AI build-out is creating a private credit bubble, in which he noted "how little extra lenders appear to charge for AI risk."

'Relatively bad' balance sheet

CoreWeave's balance sheet is "relatively bad" compared to its neocloud peers, said Paul Meeks, head of technology research at Freedom Capital Markets. That's because CoreWeave has done more borrowing and is currently building more data centers, he explained.

"The yields have blown out because there's just more and more concern — that I don't share — about the wherewithal of these guys [being] able to over time pay back their interest expense," Meeks said.

"It's definitely not a deteriorating situation," he added. "Maybe it's not improving, and I didn't really expect it to improve until these data centers get up and running."

He expects the company to report flat margins from June to September and guide for margins to have a pretty significant improvement between September and December. CoreWeave's next quarterly results are expected in November.

CoreWeave's overall credit rating is a B+ at S&P Credit Ratings, which is junk bond territory. With rates in general having risen lately, it's natural that highly-leveraged companies, such as CoreWeave, are affected, said Gavan Nolan, executive director of fixed income pricing at S&P Global Market Intelligence.

CoreWeave "has capital expenditure levels that are almost hyperscaler-like, but it doesn't have the hyperscaler balance sheet," Nolan said.

Tech sector hit

CoreWeave isn't the only tech company seeing fallout from concerns over AI debt loads. For instance, shares of Oracle closed down nearly 9% on Wednesday. Yields on its bonds were also higher, with the yield to maturity on its 6.25% bond due in Nov. 2032 sitting at 7.24%.

The overall tech sector brought down the stock market on Wednesday with the Nasdaq Composite closing down 1.9%. The debt concern seems to be hitting the shakier stocks outside of the "Magnificent Seven" the hardest.

Another neocloud stock, Nebius, dropped 10%. Dell cratered by roughly 11%.

Companies are in a race to build AI infrastructure and have turned to the credit market to finance their projects, leading to surging supply of new bonds.

For instance, hyperscalers Alphabet, Amazon, Meta Platforms and Oracle together have issued more than $228 billion in bonds, as of Oct. 13, according to LSEG. That is more than double the amount seen in all of 2025. All but Oracle have investment-grade ratings at S&P Credit Ratings.

Overall, hyperscalers are on track to spend $800 billion this year, according to JPMorgan. By 2027, it is expected to exceed $1 trillion annually, the bank said.

— CNBC's Seema Mody contributed reporting.