By Adam Levine
Public markets have recently soured on artificial-intelligence investments, but if private financing markets mean anything, the AI boom is showing no signs of slowing down.
Venture capital investment in the first quarter hit a $300 billion record, according to VC research firm Crunchbase, some 80% going to AI companies. Three of these companies--OpenAI, Anthropic, and Elon Musk's xAI--raised $172 billion in total.
Of particular note is OpenAI's record $122 billion funding round, which, when it closed this past week, gave the start-up a $730 billion equity valuation. OpenAI also held the previous record for its $40 billion 2025 round. Most of the recent funding, $110 billion, came from Amazon.com, Nvidia, and SoftBank, the Japanese investment firm that led the 2025 round.
An additional $12 billion came from a variety of sources, including three of Cathie Wood's ARK Invest exchange-traded funds-- ARK Innovation, ARK Next Generation Internet, and ARK Blockchain & Fintech Innovation. In all, OpenAI listed 28 different investors in its press release plus 11 banks involved in the company's upsized and as-yet-undrawn $4.7 billion revolving credit account.
All of that took place as OpenAI continued to produce endemic losses. In the third quarter, OpenAI had a pretax loss of some $13 billion, including noncash stock compensation. The company isn't expected to start seeing profits for several years; analyst estimates point to about $200 billion in cumulative cash losses through 2029. But investors have yet to be deterred.
The company is expected to file for an initial public offering to raise even more capital later this year.
CoreWeave is a loss-making public AI company, a "neocloud" that raised up to $8.5 billion in debt from private lenders this past week. It's trying to ride the AI boom to leapfrog from being a company with $16 million in 2022 sales to becoming a cloud-computing giant on the scale of Amazon Web Services. Wall Street analysts expect CoreWeave sales of $12.5 billion in 2026, up 143% from last year.
CoreWeave's flywheel begins with large contracts that contain upfront payments, and penalties to customers if they don't use its computing capacity. On top of those contracts and collateral from AI servers, CoreWeave raises capital, mostly through debt. At the end of 2025, the company had $21 billion in debt.
That debt funds capital expenditures to build AI data centers that produce the kind of sales growth CoreWeave has been generating. Every successful trip through the flywheel's cycle gives lenders more confidence to invest in future cycles.
When CoreWeave manages to eke out a small operating profit, it gets swallowed by interest expense that amounted to a quarter of sales last year. A crucial financial lever for the company is to lower its average interest rate, which was over 11% at the end of 2024. The new loan has rates around 6%, just 2.25 percentage points above the secured overnight financing rate, typically the baseline for loans.
Debt-rating agencies Moody's and Fitch rated the loan as investment-grade, despite CoreWeave's corporate-debt rating remaining mired in junk status.
CoreWeave stock rose 12% this past Tuesday, the day it announced the loan.
"We're competing with some of the largest companies on the planet that have the best cost of capital on the planet," says Brannin McBee, CoreWeave's co-founder and chief development officer. "Because in the age of AI, you can't be one of the small players. You have to be at scale, and the only way to be at scale and to be growing alongside these massive businesses is to stand up financing structures like this."
The new low rate is crucial because CoreWeave has a contract backlog of $67 billion and expects to spend $30 billion to $35 billion on capex this year to service customers. At the end of 2025, the company had $6.9 billion in liquidity. It has added a $2 billion equity investment from Nvidia, which is a customer, investor, and the company's most important supplier. Even with that, this week's big loan is just the beginning of its 2026 borrowing. If new debt comes with rates of 6% or less, it will dramatically reduce CoreWeave's average interest rate and drive down the importance of this cost center.
All of this suggests that private equity and credit markets continue to be enthused with AI at the close of the first quarter, despite the slide of public AI tech stocks. The Global X Artificial Intelligence & Technology ETF is down 7.4% for the year so far.
There was, in fact, enough private-market optimism to triple OpenAI's record $40 billion funding round last year. If anything, more investors are now lining up for pieces of the action, despite ongoing losses. And OpenAI's haul isn't crowding out other AI start-up investments. Absent OpenAI, Anthropic and xAI would have had record-breaking first-quarter funding rounds themselves.
Typically, if a company is piling on debt as quickly as CoreWeave, its interest rate will rise instead of what just happened -- a loan at a rate substantially lower than the borrower's credit rating would indicate. The new loan goes through 2032, and the rates suggest that lenders have much more confidence today than a year ago that CoreWeave will still be paying its bills by then.
So, who do you believe -- the public or the private markets?
Write to Adam Levine at adam.levine@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 03, 2026 03:00 ET (07:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments