Traders are aggressively betting against companies providing ‘neocloud’ services, which are crucial for AI development, as concerns about a potential private credit bubble intensify. CoreWeave, a prominent Nvidia-backed neocloud provider, saw its stock plummet 15% amid reports of aggressive debt financing and soaring bond yields, prompting market watchers to label related options trades as “bubble puts.” This downturn also impacted related stocks like Nebius Group and Iren, signaling broader anxieties within the AI infrastructure sector.
A critical segment of the artificial intelligence market is experiencing significant downturns today, with traders anticipating further declines. Companies specializing in 'neocloud' services, which provide access to the high-performance GPUs essential for AI development as a service, saw their stock prices plummet. This decline occurred despite the continued ascent of Nvidia-backed CoreWeave, whose shares were heavily impacted.
The market's reaction intensified following a Financial Times report detailing CoreWeave's pursuit of additional debt financing from insurance companies, a move that seemingly failed to bolster investor confidence. Concurrently, concerns about a potential private credit bubble gained traction on social media, amplified by a post from Social Capital founder Chamath Palihapitiya highlighting CoreWeave's bonds reaching a striking 15% yield, a sentiment echoed by Elon Musk with a simple "yikes." CoreWeave's stock itself experienced a sharp 15% drop.
Other popular trades linked to the build-out of data centers, such as Nebius Group and Iren, also faced significant losses, falling as much as 10%. The trading activity surrounding these stocks reflected heightened volatility. Options volume for CoreWeave surged to over seven times its 30-day average, Nebius saw nearly four times the usual volume, and Iren traded at twice its normal volume. Data from Cboe LiveVol indicated that while more calls than puts traded for Nebius and Iren, a substantial portion of these calls were likely initiated by sellers rather than buyers, suggesting bearish sentiment.
The most pronounced bearish activity was observed in CoreWeave, where traders purchased close to 200,000 put options compared to 106,000 call options, signaling a strong bet on a price decline.
A particularly notable trade occurred around 10 a.m. ET, involving the acquisition of approximately 26,000 put options with a strike price of $37.50, set to expire on December 18th. These options were reportedly bought at the ask price, indicating the buyer's strong intention to purchase, according to data from SpotGamma. Scott Bauer, CEO of Prosper Trading Academy, characterized these as "bubble puts," suggesting they represent a defensive strategy against a potential collapse in the AI sector rather than a bet on a complete failure. He posited that these trades might serve as a hedge for significant exposure in highly correlated stocks or even the Nasdaq index.
The total cost for these options amounted to $1.9 million, with each contract priced at 74 cents. For these puts to become profitable, CoreWeave's stock would need to depreciate by an additional 42% within the next two months. Prior to this substantial trade, open interest in these specific contracts was minimal, with just over 1,000 open contracts, highlighting the novelty of this large position.
CoreWeave, which had its initial public offering in March 2025 at $40 per share, is now facing increased scrutiny. Bauer speculated that this trade could be from an early investor or an IPO participant looking to protect their initial investment or breakeven point, especially if similar protection couldn't be secured through other avenues like individual stocks, indices, or alternative financial products.
