A key corner of the artificial intelligence trade is taking a beating on Wednesday and traders are betting it could get even worse.

Shares of neocloud companies – businesses that offer access to the GPUs powering artificial intelligence as a service – plunged Wednesday after debt yields for Nvidia-backed CoreWeave continued to reach new heights. (An article in The Financial Times that the company is targeting insurance companies for further debt financing apparently didn't help things either.)

Meanwhile, in a post on X, Social Capital founder Chamath Palihapitiya raised questions about a private credit bubble alongside a screengrab showing CoreWeave's bonds hitting a 15% yield. Elon Musk replied "yikes." CoreWeave stock plunged 15%. Nebius Group and Iren, popular trades connected to the data centers build-out, also fell as much as 10%.

Options volume in CoreWeave surged to more than seven times the 30-day average, Nebius almost four times, and Iren twice the normal volume. More calls traded than puts in Nebius and Iren, but in both, more calls were likely initiated by sellers than buyers, according to Cboe LiveVol data.

The most bearish action was in CoreWeave, where traders bought just shy of 200,000 puts, compared to 106,000 calls.

CoreWeave, 1 month

One standout trade happened around 10 a.m. ET when someone opened a new position of 26,000 37.5-strike puts expiring Dec. 18 that traded near the ask price, suggesting the puts were purchased, according to SpotGamma data.

"These are bubble puts," said Scott Bauer, CEO of Chicago-based Prosper Trading Academy. "These are not rip-ups that you buy thinking they'll go to zero. This is the hub, the center of the AI trade, and likely some kind of margin play for someone to hedge their exposure in highly correlated stocks or maybe even the Nasdaq."

The contracts sold for 74 cents apiece for a total of $1.9 million and need CoreWeave to erase another 42% over the next two months to pay off. Prior to this trade, there were just over 1,000 open contracts, meaning the position is a new one.

CoreWeave IPO'd in March 2025 at $40 per share.

"Maybe this is someone that was in early or in on the IPO saying this is my breakeven level," Bauer added. "Maybe they couldn't get this kind of protection in other stocks, the index, or other products."