Private credit bubble concerns intensify! After CoreWeave (CRWV.US) plunged 15%, traders bought "bubble put options" to bet on further declines.

A key area of the overnight U.S. stock market's artificial intelligence trade was hit hard, and traders are betting the situation could worsen further. So-called "neocloud" companiesbusinesses that provide GPU compute power for AI in the form of servicessaw their shares fall sharply after the bond yields of CoreWeave (CRWV.US), backed by NVIDIA Corporation, continued to set new highs. The Financial Times reported that CoreWeave is targeting insurance companies for further debt financing, which clearly also failed to ease market concerns. Meanwhile, Social Capital founder Chamath Palihapitiya posted on X with a screenshot showing CoreWeave's bond yield hitting 15%, questioning the private credit bubble. Elon Musk replied, "yikes." CoreWeave's stock plunged 15%. Nebius Group and Iren, popular trades tied to data center construction, also fell by as much as 10% at one point. The options market was equally volatile. CoreWeave's options volume surged to more than 7 times its 30-day average, Nebius nearly 4 times, and Iren twice its normal level. Cboe LiveVol data showed that for Nebius and Iren, call options traded more than puts, but in both cases the calls were more likely initiated by sellers rather than buyers. CoreWeave was the most bearish: traders bought nearly 200,000 put options, compared with 106,000 call options traded. Around 10 a.m. Eastern Time, a standout trade appeared: someone opened a new position of 26,000 put options with a strike price of $37.5 expiring Dec. 18, at a price close to the seller's asking price. SpotGamma data indicated that these puts were bought. Scott Bauer, CEO of Chicago-based Prosper Trading Academy, said: "These are bubble puts. Not the kind of extreme options bought to bet the company goes to zero. This is the hub and core of the AI trade, and it's likely some kind of margin operation by someone to hedge exposure in highly correlated stocks or even the Nasdaq." The premium on these contracts was $0.74 per contract, totaling about $1.9 million, and CoreWeave would need to fall another 42% over the next two months for the trade to break even. Before the trade, open interest in that series was only slightly above 1,000 contracts, indicating this was a brand-new position. CoreWeave IPO'd in March 2025 at $40 per share. Bauer added: "Maybe this is an early investor or IPO participant saying, this is my break-even point. Maybe they can't get this kind of protection in other stocks, indexes, or other products." The moves above highlight that as AI infrastructure financing expands, the linkage between debt costs and equity volatility is strengthening.