<\/p>\n
CoreWeave (CRWV) stock plunged 12% on Friday, putting the AI infrastructure company on track to finish the week down 25% as concerns over AI funding continued to weigh on market sentiment.<\/p>\n
Earlier this week, Bloomberg reported a sharp rise in CoreWeave’s bond yields, raising concerns about whether the company can generate enough cash flow to support its rapid expansion.<\/p>\n
CoreWeave’s bond yields climbed to around 15%, while the cost of insuring its five-year debt against default rose by as much as 74.5 basis points to 1,194.5 basis points, an all-time intraday high, according to Bloomberg. That could mean odds of more than 60% that CoreWeave would default sometime in the next five years.<\/p>\n
CoreWeave has been spending heavily on data centers and Nvidia (NVDA) chips to meet soaring demand for AI computing power.<\/p>\n
The company has secured major contracts with AI developers and technology companies, but building the infrastructure needed to fulfill those agreements requires substantial upfront investment.<\/p>\n
Nvidia CEO Jensen Huang defends CoreWeave<\/p>\n
Friday’s decline came after CoreWeave stock rebounded on Thursday, following comments from Nvidia CEO Jensen Huang that helped ease some concerns.<\/p>\n
“CoreWeave’s strength is improving every day,” Huang said at a Bloomberg event in Stockholm. “I’m optimistic. Their cost of capital is actually decreasing.” <\/p>\n
Nvidia holds roughly 47.2 million shares of CoreWeave, representing about a 10% stake in the company. CoreWeave is also a major customer of Nvidia’s chips.<\/p>\n
However, Huang’s reassurance failed to sustain the rebound.<\/p>\n
Peer Nebius (NBIS), another company investing heavily in AI computing infrastructure, dropped about 12% on Friday and was also headed for weekly losses. Nvidia also invests in Nebius.<\/p>\n
Also read: Dell stock price tumbles 6.8% after epic 271% run<\/p>\n
In August, CoreWeave reported second-quarter results that topped Wall Street expectations.<\/p>\n
The company posted an adjusted loss of $1.03 per share, narrower than the $1.20 loss analysts expected. Revenue came in at $2.58 billion, up 112% from a year earlier and above the $2.56 billion estimated by Wall Street.<\/p>\n
For the third quarter, CoreWeave guided for revenue of $3.4 billion to $3.6 billion, implying 158% growth at the midpoint. Analysts surveyed had expected $3.43 billion, CNBC reported.<\/p>\n
CoreWeave also reported a revenue backlog of more than $100 billion. That means it hasn’t earned that money yet.<\/p>\n
CoreWeave stock is down 15% year-to-date.<\/p>\n
Getty Images<\/p>\n
Analyst recommends buying CoreWeave stock on a dip<\/p>\n
Despite the recent selloff, Cantor Fitzgerald analyst Brett Knoblauch believes investors are focusing too heavily on CoreWeave’s debt and overlooking its improving business fundamentals.<\/p>\n
In a research note, Knoblauch said CoreWeave’s debt-yield spike reflects concerns about financing massive AI capital expenditures rather than weakening demand, according to The Fly.<\/p>\n
Also read: Micron stock tumbles despite analyst calls semiconductor selloff<\/p>\n
Knoblauch said demand remains strong, with nearly all of CoreWeave’s 2027 capacity already sold and Nvidia providing a backstop for unsold capacity. He also pointed to improving economics, including rising revenue per megawatt and contribution margins, which have shortened the payback period for AI chips to 2-2.5 years.<\/p>\n
Knoblauch believes improving unit economics and asset-backed financing can help CoreWeave sustain its rapid growth despite concerns about borrowing costs.<\/p>\n
Cantor Fitzgerald maintained its overweight rating and $176 price target on CoreWeave shares, recommending that investors buy the dip.<\/p>\n
CoreWeave stock trades at around $61 as of writing.<\/p>\n
Related: Cathie Wood sells $15.8 million of popular semiconductor stock<\/p>\n
#CoreWeave #stock #plunges #Wall #Street #analyst #buy #dip<\/p>\n","protected":false},"excerpt":{"rendered":"
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