Technology & Semiconductors

What happened

In October 2026, investors demanded a yield of more than 15% to hold the $1.25bn of 9.625% unsecured notes that CoreWeave (NASDAQ: CRWV), an AI cloud provider, issued in June 2026 [1][2], and its share price fell about 30% between its 30 September 2026 and 29 October 2026 closes [3]. The concern is the cost of its expansion: CoreWeave had about $35.6bn of debt at 30 June 2026, and its second-quarter net interest expense rose to $640m from $267m a year earlier, against adjusted operating income of only $128m [2][4]. For the third quarter of 2026, the company has guided to $860m–$940m of interest expense and $200m–$260m of adjusted operating income [5].

What people are missing

The figures suggest that the binding limit is the plant rather than demand: at 30 June 2026 CoreWeave had a revenue backlog of about $104bn but only about 1.5 GW of active power [4], against about 4.2 GW of contracted power by 11 August 2026 [6], so less than half of the power it had secured was running. That plant is paid for up front, with $14.1bn spent on property and equipment in the first half of 2026 alone [4], yet a site earns nothing until its power, chips, networking, and cooling are installed and commissioned. Liquids absorb much more heat than air, so many CoreWeave data centres use closed-loop liquid cooling, including direct-to-chip systems that pass coolant through plates attached to the processors [7], and good practice when commissioning such a loop is to flush out fabrication debris, then test the circulating coolant for glycol concentration, pH, reserve alkalinity and corrosion-inhibitor levels, with dissolved metals an early warning of corrosion [8]. We have found no evidence that cooling has delayed CoreWeave’s projects — the point is that every new site must pass through a physical commissioning sequence before it can earn, while interest is charged on borrowed money from the day it is drawn. Even CoreWeave’s target of more than 1.85 GW of active power by the end of 2026 would be less than half of the 4.2 GW contracted [5][6].

Why it matters

In plain terms, in the second quarter of 2026 CoreWeave paid its lenders five times what its day-to-day business earned, and its own forecasts imply that the gap will widen in the third quarter [4][5]. At the same time borrowing is getting more complicated: US consumer prices rose 3.7% in the year to September 2026 [9], and the US central bank raised interest rates in September 2026, then kept them at 3.75%–4% on 28 October 2026, with two officials voting for a further rise [10][11]. Customers have already signed up for about $104bn of future work [4], so the question is not whether people want CoreWeave’s computing power but whether it can switch on data centres fast enough to keep up with its interest bill.

What we are watching next

CoreWeave holds its third-quarter results call on 10 November 2026, the same day the US publishes its October inflation data [12][9]. We will compare net interest expense with the $860m–$940m guidance, and active power with the target of more than 1.85 GW by the end of 2026 [5]. Active power rising faster than interest costs would challenge our reading, while interest climbing as capacity lags would confirm it.

Sources

1. CoreWeave — CoreWeave Announces Pricing of $1.25 Billion of Senior Notes and €2 Billion of Senior Notes (11 June 2026)
2. Forbes — CoreWeave Debt Says The Market May Not Be Irrational (15 October 2026)
3. Stock Analysis — CoreWeave (CRWV) Stock Price History
4. CoreWeave — CoreWeave Reports Strong Second Quarter 2026 Results (11 August 2026)
5. MarketBeat — CoreWeave Q2 Earnings Call Highlights (11 August 2026)
6. CoreWeave — CoreWeave Expands Global AI Cloud Platform With New Capacity in Denmark and First Global AI Network Backbone (27 October 2026)
7. CoreWeave — Liquid Cooling for AI Data Centers: Run Cold, Act Bold (4 May 2026)
8. Electronics Cooling — Coolant Health as a Reliability Variable in Direct-to-Chip Data Center Cooling (25 August 2026)
9. US Bureau of Labor Statistics — Consumer Price Index – September 2026 (14 October 2026)
10. Federal Reserve — FOMC Statement (16 September 2026)
11. Federal Reserve — FOMC Statement (28 October 2026)
12. CoreWeave — CoreWeave Announces Date of Third Quarter 2026 Financial Results and Conference Call (27 October 2026)

What happened

Taiwan Semiconductor Manufacturing Company (NYSE: TSM) is investing heavily in the US at a time when Washington and Beijing are fighting for control of the semiconductor supply chain. In July, TSMC announced another $100bn investment in Arizona, bringing its total planned investment in the US to $265bn [1]. One reason this matters is Taiwan’s position in the conflict: China has been increasing its military activity around the island, where TSMC makes many of the world’s most advanced chips [2]. At the same time, the US has introduced export controls to prevent China from accessing advanced chips, manufacturing equipment and high-bandwidth memory [3]. The US is therefore trying to do two things at once: slow down China’s progress in advanced semiconductors and become less dependent on Taiwan for its own chip supply.

What people are missing

The semiconductor industry is not controlled by one country. Instead, it depends on a small number of companies, each specialising in a different part of the production process. American companies like Nvidia design AI chips but rely on TSMC to manufacture them, and TSMC itself depends on other companies, including the Dutch firm ASML, the only commercial supplier of extreme ultraviolet (EUV) lithography machines. These machines are used to print the smallest features on advanced chips, and US-led export restrictions have prevented China from buying them [4].

But having the right machines is only part of the challenge. Making a semiconductor involves hundreds of steps, and manufacturers need years of experience to improve their processes and increase the number of working chips they get from each silicon wafer. This is where TSMC has a major advantage. Over several decades, it has built a network of factories in Taiwan that work closely together; it can also reuse equipment from older manufacturing generations and move production between facilities to make better use of its existing manufacturing capacity [5]. This helps TSMC increase output without having to build an entirely new factory every time demand rises.

These capabilities matter financially because manufacturing yield directly affects the cost per usable chip. If a wafer produces fewer working chips, its production costs must be spread across fewer saleable units, increasing the cost of each chip. TSMC’s accumulated manufacturing expertise therefore gives it an advantage not just in production efficiency, but potentially in profitability as well. Replicating its factories overseas is not simply a matter of buying the same equipment; it also means reproducing the processes and experience needed to operate that equipment efficiently at scale. This is what makes the US–China rivalry more complicated than it first appears: China cannot easily replace the foreign technologies it is being denied, but the US cannot simply build a few factories in Arizona and expect to reproduce everything TSMC has developed in Taiwan.

Why it matters

Taiwan’s importance in semiconductor manufacturing makes it a major risk for companies that depend on TSMC. If a military conflict or blockade were to disrupt production or shipments from the island, the effects could be felt across the global technology industry. Building factories in Arizona helps reduce this dependence and brings chip production closer to American customers such as Nvidia, AMD and Apple [6]. However, diversification comes at a cost: building new factories requires substantial upfront capital expenditure, long before those facilities generate revenue, and once production begins, their profitability depends on manufacturing yields, operating costs and how fully their capacity is used. Overseas expansion could therefore improve supply security while putting pressure on cash flow and gross margins, particularly while new facilities are ramping up. This creates a difficult balance for TSMC: it must expand outside Taiwan to make its supply chain more resilient without undermining the manufacturing efficiency that underpins its competitive advantage.

What we are watching next

TSMC will publish its third-quarter results on 15 October [7]. We will be watching management’s guidance on capital expenditure, the financial impact of overseas expansion and the progress of the Arizona ramp — gross-margin guidance in particular, since it can help show whether the costs of expanding internationally are pressuring overall profitability, though TSMC may not disclose Arizona-specific margins or yields. We will also look for measurable evidence that Arizona’s operations are becoming more efficient. The central question is whether TSMC can diversify production while preserving the manufacturing economics behind its competitive advantage.

Sources

1. Arizona Commerce Authority — TSMC Announces Additional $100 Billion Investment in Arizona (16 July 2026)
2. Reuters — Former Taiwan President Tsai Tells US Audience of Sustained Chinese Pressure (8 October 2026)
3. US Bureau of Industry and Security — Export Controls on Advanced Semiconductors (2 December 2024)
4. ASML — Export Restrictions Update (2 December 2024)
5. TSMC — 2025 Annual Report
6. US Department of Commerce / NIST — TSMC Arizona and the US Semiconductor Supply Chain
7. TSMC — Financial Calendar