Cathie Wood bought CoreWeave stock after a 45% drop. Should we follow her example?
Cathie Wood's investment firm Ark Invest bought more than 400,000 shares of Nvidia's cloud partner, AI cloud computing provider CoreWeave, through two exchange-traded funds ETFs on Nov. 24. By this point, they had fallen 45% over the past month. In trading on Nov. 25, CoreWeave shares fell another 4.1% to $70.6 amid a 7% drop in Nvidia shares and a broader decline in technology stocks.
The deal underscores Ark's confidence in the company's long-term potential despite high volatility, Seeking Alpha notes. Ark continues to bet on companies developing breakthrough technologies, despite the cooling of market sentiment toward certain players in the AI sector, the publication notes.
The bulk of the purchase came from ARK Innovation ETF's flagship fund, ARK Innovation ETF, which added 396,178 shares. Following the transaction, the market value of CoreWeave's stake in ARKK's portfolio reached $52.4 million, representing 0.7% of the fund's total volume. A second fund, ARK Next Generation Internet ETF, bought another 41,167 shares, bringing the position's value to $35.75 million - 1.71% of the portfolio.
Why stocks are falling
CoreWeave shares are declining amid investors' concerns about the overvaluation of the AI sector, as well as after the November 11 report, in which the company reported that in the third quarter the operating profit margin was 4%, falling short of analysts' consensus forecast of 6.5%. This compares to 20% in 2024 for the same period.
The decline in margins was a weakness in the generally positive reporting, Bloomberg wrote. Revenue rose 134 percent to $1.36 billion, with Wall Street, according to LSEG, expecting $1.29 billion, CNBC reported. The loss was $0.22 per share, while analysts had forecast $0.57. The report also showed that the backlog - a measure of future sales - totaled $55.6 billion at the end of the quarter. This is almost twice as much as in the previous period, emphasizes Bloomberg.
The cloud computing provider's stock performance is now being tracked by 31 analysts, according to MarketWatch. Of those, 16 of them advise buying the stock, 13 advise holding, and only two advise selling. The Wall Street consensus price target is $130.9 per CoreWeave share, up nearly 78% from the closing price on Nov. 24.
This article was AI-translated and verified by a human editor
