CoreWeave's stock extended its decline this week, falling to $57, its lowest level since May 9 of last year. The shares have now dropped more than 67% from their 2025 peak, erasing billions in market value. The sell-off comes even as demand for AI computing power remains robust, raising questions about whether the market is pricing in fundamental risks or merely reacting to broader sentiment.
Demand for AI compute remains strong
CoreWeave, which transitioned from Bitcoin mining to AI infrastructure, has become the largest player in the neocloud sector. It has secured contracts with major AI companies, including Anthropic, OpenAI, and Jane Street. The company is benefiting from the ongoing surge in demand for computing power, a trend that many analysts believe still has room to grow.
On Tuesday, Nvidia CEO Jensen Huang highlighted the strength of the neocloud market, stating that demand is "off the charts." He noted that the primary constraint is not demand but the availability of working capital to fund expansion. "What is missing in the middle is the working capital to fuel that growth because there’s just so much demand across so many sectors of AI, capital is scarce," Huang said.
This week, the Wall Street Journal reported that Anthropic's S1 filing revealed future infrastructure costs could exceed $600 billion. Anthropic is reportedly in talks for additional computing deals that could raise its commitments by up to $150 billion, potentially involving CoreWeave.
Revenue backlog and growth prospects
CoreWeave's revenue backlog reached $104 billion at the end of the June quarter, making it the largest neocloud provider. The company's quarterly revenue more than doubled year-over-year to $2.57 billion, up from $1.2 billion. Wall Street analysts project annual revenue of $12.87 billion this year, rising to $26.35 billion next year, with potential to reach $50 billion in the foreseeable future.
However, the company's financing costs are elevated. Its bond yields have surged, with some long-term issues yielding as much as 15%. Total debt has climbed to nearly $30 billion, raising concerns about the sustainability of its capital-intensive business model.
Analyst warnings and industry risks
Some analysts warn that CoreWeave may face significant impairments in the coming years. A recent Gartner report stated that AI data center owners would need to generate a cumulative $8.5 trillion in revenue to cover their capital spending, but the firm expects total revenue to be no more than $3.6 trillion. The report specifically noted that "neoclouds will be among the most exposed to the imbalance between revenue and capital spending."
These concerns have weighed on the stock, which has formed a head-and-shoulders pattern on the daily chart, a bearish technical signal. The shares remain below all major moving averages, and the Relative Strength Index (RSI) has fallen to oversold levels near 30. If the pattern plays out, the stock could decline further, potentially reaching $35.
Is the sell-off a buying opportunity?
The sharp decline has led some investors to consider whether the stock is now undervalued. However, the combination of high debt, rising bond yields, and potential industry-wide overcapacity suggests that the risks remain substantial. While demand for AI compute is strong, the financial strain on neocloud providers like CoreWeave could persist until the industry matures and revenue catches up with capital expenditures.
Investors will be watching for any signs of stabilization in the stock, as well as updates on contract negotiations and debt management. The coming quarters will be critical in determining whether CoreWeave can navigate the challenges ahead.
This article is for informational purposes only and does not constitute financial advice.
