CoreWeave (CRWV) shares took a hit Tuesday, falling more than 8% after Google (GOOGL) and Blackstone (BX) announced a joint venture to build massive AI infrastructure. The deal, which brings together one of the world's largest tech companies and a giant in private equity, is a clear signal that the AI cloud market is getting more crowded — and that's bad news for specialized players like CoreWeave.
The sell-off wasn't just limited to CoreWeave. Nebius Group (NBIS), another neocloud provider, also fell nearly 5% as investors took a hard look at the competitive landscape. But the move seemed more about perception than any sudden change in CoreWeave's business. The company's fundamentals haven't deteriorated overnight; the market is just pricing in a new reality where the biggest players are spending billions to build their own AI infrastructure.
By Tuesday afternoon, CoreWeave shares were trading at $95.39, down 8.07%, while Nebius Group was at $190.02, down 4.92%, according to market data.
Analyst Flags Margin and Debt Concerns
Adding to the pressure, DA Davidson analyst Gil Luria initiated coverage on CoreWeave with a Neutral rating and slashed his price target to $100 from $175. His concern? Rising input costs and thin margins. Luria noted that CoreWeave generates adjusted EBIT margins of only about 1% on roughly $8 billion in annual revenue. That leaves the company vulnerable as memory and infrastructure costs climb.
He also pointed out that CoreWeave's multi-year contracts may not fully protect it from long-term pricing risks, and that execution risks are elevated given the company's rapid expansion and heavy reliance on debt financing. In other words, CoreWeave is growing fast, but it's doing so on borrowed money, and that debt could become a problem if the competitive environment gets tougher.
Analyst Consensus and Recent Moves
Despite Tuesday's drop, the broader analyst consensus on CoreWeave is still a Buy, with an average price target of $133.84. But the recent analyst actions tell a mixed story:
- DA Davidson: Downgraded to Neutral, lowered target to $100 (May 18)
- Citigroup: Maintained Buy, raised target to $158 (May 14)
- Cantor Fitzgerald: Maintained Overweight, raised target to $167 (May 11)
So while some analysts see the Google-Blackstone venture as a threat, others think CoreWeave's specialized focus and existing contracts still give it an edge. The next few months will show which camp is right.
