CoreWeave (CRWV) shares declined nearly 3% in premarket trading Monday, pressured by a broader tech selloff triggered by rising global bond yields. The 30-year U.S. Treasury yield climbed above 5.3% last week, a level not seen in nearly two decades, while yields in Japan, France, and Germany also hit multi-year highs. Despite the macro headwinds, Truist Securities reiterated a Buy rating and lifted its price target to $165 from $155, implying roughly 88% upside from Friday's close.
Pricing power offsets GPU cost inflation
Analyst Arvind Ramnani argues that CoreWeave's ability to raise prices will more than compensate for escalating GPU costs. He expects the company's price increases to largely flow through to margins in the second half of 2026, even as Nvidia's higher costs impact systems shipped early next year. Ramnani estimates contribution margins on future longer-duration contracts could expand from about 24% to 33%, with additional upside from shorter-duration deals and re-contracting of previous-generation GPUs.
CoreWeave rents computing capacity powered by Nvidia and other chipmakers' GPUs. The AI boom has driven up demand for memory and storage, pushing GPU prices higher. Nvidia has reportedly raised prices on its latest GPUs by more than 15%, creating a potential margin squeeze. However, CoreWeave increased prices across its inventory by 25% in July, according to Ramnani, helping offset the higher equipment costs.
AI infrastructure demand remains supply-constrained
Truist sees limited risk to CoreWeave's existing contracts and views the market as still supply-constrained. The bank's bullish stance aligns with broader Wall Street sentiment: LSEG data shows 27 of 40 analysts covering the stock have a Buy or Strong Buy rating. CoreWeave shares have gained 23% in 2026, though with significant volatility—up 39% in the first half before a 28% drop in July.
The company operates in the neocloud sector, providing computing capacity to customers benefiting from the AI infrastructure buildout. Neocloud providers have enjoyed substantial spending from large tech firms and hyperscalers, but the rapid expansion has raised questions about whether these companies can generate adequate returns on their investments.
Capital spending concerns linger
Noah Weisberger, chief strategist at BCA Research, offers a more cautious view. He argues that neocloud companies could "destroy capital" by using borrowed money to expand what may become a low-margin commodity service. In a recent report, Weisberger and colleague Dishaan Pandey analyzed six neocloud firms and found that heavy capital spending could lead to significantly lower returns on invested capital compared with hyperscalers' infrastructure investments.
Weisberger notes that neoclouds benefit from spending elsewhere in the tech supply chain, but they must invest heavily to generate that revenue. If interest rates stay elevated, financing costs could amplify the risk and compress valuations across the group. CoreWeave's pricing power, however, may provide a relative advantage over peers.
For investors weighing the bull and bear cases, the debate centers on whether neoclouds can sustain pricing power and margin expansion amid rising costs and potential competition. Truist's target implies significant upside, but the capital intensity of the business remains a key risk. As the AI infrastructure cycle matures, the ability to pass through costs will be crucial for CoreWeave and its peers.
This article is for informational purposes only and does not constitute financial advice.
