CoreWeave's stock continued to fall. Huang and Wood were unable to sustain its rise
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On October 16, shares of cloud provider CoreWeave resumed the decline that began last week. Thus, despite a 6% gain at the close of trading on Thursday, the stock fell 7% on Friday and has lost more than 21% over the past five trading sessions.
Investors are concerned about the company’s debt burden, as well as the cost to the cloud provider of financing the construction of its AI infrastructure. Yesterday, CoreWeave’s credit risk indicator—the cost of default insurance (CDS)— jumped above 1,194 basis points. A figure above 1,000 points typically indicates serious credit problems, CNBC noted. Against the backdrop of rising yields on CoreWeave bonds, as well as the release of a report by Gartner analysts in which they predicted that more than 80% of non-cloud providers will not be able to survive as independent companies after 2030 if AI infrastructure costs continue to rise at such a rapid pace, — investors have been selling off shares of CoreWeave and other non-cloud companies, including, for example, Arkady Volozh’s Nebius, for several days this week. The latter have also lost 21% over the past five trading sessions and are down more than 7% on October 16.
Huang and Wood were unable to keep up
Shares of cloud providers, including CoreWeave, failed to rally even on the back of statements by Nvidia CEO Jensen Huang (the company is CoreWeave’s second-largest shareholder and owns approximately 10% of the firm) and ARK Invest founder Cathie Wood, Barron’s notes. Huang stated the day before that he is optimistic about the cloud provider’s business prospects and that “CoreWeave’s metrics [according to him] are improving.” Wood, for her part, said that concerns about CoreWeave’s high borrowing costs are typical for young companies that raise capital during periods of high interest rates. In her view, thanks to growing demand for AI, the company will overcome these concerns. ARK Invest bought CoreWeave shares during a market pullback.
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