CoreWeave Inc. (CRWV) stock fell more than 3% in Tuesday's premarket trading as concerns over the AI cloud provider's rising borrowing costs and heavy debt continued to weigh on investor sentiment.
The decline came amid broader market weakness, with Nasdaq futures down 0.37% and S&P 500 futures slipping 0.04%.
Despite strong demand for AI computing infrastructure and renewed optimism from Wall Street analysts, CoreWeave has struggled to rebound from a sharp selloff. The stock is down nearly 15% year to date.
Evercore Sees Strong AI Demand Despite Debt Concerns
Evercore ISI Senior Managing Director Amit Daryanani maintained an Outperform rating and a $150 price forecast on CoreWeave.
Daryanani told CNBC on Monday that investors were focusing heavily on a relatively small portion of unsecured debt yielding 14% to 15%.
He said much of CoreWeave's debt is backed by contracts with high-credit-quality customers, including Meta Platforms Inc. (META), Microsoft Corp. (MSFT) and OpenAI. Those arrangements carry financing costs of about 5.5%.
He also noted that GPU rental prices rose 15% to 20% per quarter over the past two quarters.
Meanwhile, some recent CoreWeave contracts generated approximately $20 million in annual revenue per megawatt, compared with a historical range of $10 million to $11 million.
Evercore estimates that CoreWeave can generate returns on invested capital of 15% to 20% per project.
Daryanani believes a 100- to 200-basis-point increase in borrowing costs would remain manageable. However, financing all future projects at 15% would pose a significant challenge.
Goldman Sachs Sees Upside Despite Financing Concerns
On Monday, Goldman Sachs analyst Gabriela Borges upgraded CoreWeave to Buy from Neutral but lowered the price forecast to $106 from $139.
Borges said investors may be overestimating CoreWeave's future borrowing costs while overlooking potential improvements in returns.
The analyst noted that CoreWeave had raised computing prices by 25% in July and another 10% in October, reflecting strong demand for AI infrastructure.
However, Goldman Sachs warned that financing costs and shifts in AI computing demand remain key risks.
Meanwhile, the yield on CoreWeave's 2031 bonds fell to 15.13% from more than 16% last week, according to Tradeweb data cited by Reuters.
However, Great Hill Capital Chairman Thomas Hayes warned that bond investors remain skeptical and could demand higher yields to finance AI infrastructure growth.
Rising Borrowing Costs Threaten AI Infrastructure Financing
According to Bloomberg, credit investors are raising concerns about the growing cost of financing AI infrastructure as a wave of new debt issuance approaches.
Grant Nachman, founder and chief investment officer of Shorecliff Asset Management, warned that current market conditions could make large unsecured loans to neocloud providers prohibitively expensive or difficult to secure.
Meanwhile, John Yovanovic, co-head of leveraged finance at MetLife Investment Management, said the bigger concern is the substantial debt supply expected over the next 18 months.
He added that companies' willingness to pay increasingly higher borrowing costs could hurt existing bondholders, making investors reluctant to buy debt before yields rise further.
Technical Analysis: Oversold but Downtrend Persists
CoreWeave remains in a bearish technical trend.
At a reference price of $59.14, the stock trades approximately 27.5% below its 20-day simple moving average of $81.75 and 36% below its 200-day average of $92.39.
Meanwhile, its relative strength index stands at 29.05, indicating oversold conditions.
Although this reading suggests selling pressure may be stretched, it does not guarantee a rebound.
The stock also remains under pressure from a death cross formed in July, when its 50-day moving average fell below its 200-day average.
The $78.25 level represents potential resistance near the 20-day exponential moving average.
On the downside, traders are watching the previous 52-week low near $59.25. Tuesday's indicated premarket price was already below that level, raising the risk of further weakness.
CRWV Price Action
CRWV Price Action: CoreWeave shares were down 4.16% at $58.58 during premarket trading on Tuesday. The stock is trading at a new 52-week low, according to market data.
