Why Citi Thinks Microsoft Beats Neoclouds in the AI Debt Squeeze

A one-day 15% drop in CoreWeave stock last week was driven by higher interest rates rather than faltering demand, Citi analyst Tyler Radke said. Radke, co-head of US software research at Citi, ranks Microsoft among his highest-conviction ideas. Neoclouds rent Nvidia chips to AI developers, often with borrowed money; CoreWeave’s bonds yielded close to 15%, and Oracle ended 8.8% lower. Radke says the 10-year Treasury yield climbed about 30% from its March low, pressuring borrowers without investment-grade ratings as the market absorbs an AI debt glut. He expects higher borrowing costs to feed into future neocloud contract prices.