CoreWeave Has Lost a Staggering Amount of Stock Value Over the Past Six Months

AI-driven cloud computing company CoreWave burst onto the scene in March with the technology’s largest IPO since 2021.

The company’s shares rose more than 40% in the following days, riding on the massive hype surrounding generative AI. The hype has been driven by voracious AI companies like Microsoft, OpenAI, and Meta that have leased hundreds of megawatts of computing while companies like CoreWeave build massive data centers.

If AI chip maker Nvidia is the one selling shovels during the ongoing AI gold rush, then, in other words, CoreWeave is the one buying those shovels in bulk and renting out access to the drilling sites.

But persistent fears of an AI bubble have significantly dampened investor enthusiasm, leaving many wondering whether CoreWeave could be a canary in the coal mine — and even drawing comparisons to Enron, a company with a highly speculative valuation that imploded in the wake of a major accounting scandal in 2001.

as Wall Street Journal According to reports, CoreWeave’s stock price has fallen 46 percent in just six weeks, with a $33 billion value going up in smoke. At press time, shares are hovering at just under $70, meaning the company has lost a staggering 56 percent of its stock value in just six months.

This may be a sign that investors are concerned that massive spending by companies like CoreWeave may not be justified in the long term. Even AI leaders have warned that a comeback may still be many years away, with OpenAI admitting last month that it won’t make any money until at least 2030.

It doesn’t take much reading between the lines to understand why they’re nervous. Taking on a massive amount of high-interest debt to build and lease AI data centers leaves the company facing a significant degree of risk, which could put it in first place if the AI ​​bubble bursts.

Its operations are also facing some major headwinds, both literally and figuratively. Rainstorms in Texas forced the company to delay pouring the foundation for the artificial intelligence data center complex, delaying the completion date by months, according to the NBC website. Wall Street Journal Reports.

Investors have also refrained from revolving financing arrangements in this sector. For example, Nvidia owns six percent of the company’s shares, while CoreWeave has signed an exclusive contract with the AI ​​chip maker to use only its GPUs. Microsoft represents 62 percent of CoreWeave’s 2024 revenue, as… Wall Street Journal As he noted last month, he is also a major shareholder in OpenAI, CoreWeave’s largest customer.

Then there’s CoreWeave CEO Michael Intrator, who downplayed those concerns last month.

“If you build something that accelerates the economy and has fundamental value to the world, the world will find ways to finance an enormous amount of work,” he said at a press conference. Wall Street Journal The event is in early November.

After days of downplaying concerns about an AI bubble, Intrator was probed by investors during a quarterly earnings call over delays at a Texas data center construction site.

“There are 32 data centers in our portfolio,” he said, and that “this data center will catch up, and then we will move forward from there.”

According to Wall Street JournalThe company’s CFO, Nitin Agrawal, had to step in and explain that there were delays experienced by multiple data centers of a single “data center provider.”

Investors are also concerned that the massive amount of debt being taken on could be significantly exacerbated by supply chain bottlenecks. The delay may not seem like a big deal in the grand scheme of things, but given how much money and interest is at stake, there’s a tremendous amount of pressure on CoreWeave to deliver some good news.

“The bullish idea is that they will expand it, and a lot of companies have low margins to start, but this is a scale-up company,” said Jill Loria, an analyst at DA Davidson. Wall Street Journal. “There’s no scaling going on here.”

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