CoreWeave Drops Another 7%. Even Jensen Huang and Cathie Wood Can't Buoy the Stock

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CoreWeave was falling again early Friday. The cloud-computing company is on track to lose all the gains it made on the back of the vote of confidence from Nvidia CEO Jensen Huang amid doubts over its debt.

CoreWeave shares were down 7.55% at $64.43 on Friday. The stock rose 5.9% on Thursday after Huang said his chipmaking company didn't need to backstop CoreWeave -- which counts Nvidia among its investors -- as its financial strength was improving.

But shareholders are still nervous. CoreWeave stock has fallen 15% in the past five trading sessions. That's partly a reaction to soaring yields on its debt, which have touched as high as 16% as investors demand more compensation for the risk of its borrowing. CoreWeave carries a 'B,' or highly speculative, credit rating from S&P Global because it carries a high level of debt relative to earnings.

Other so-called neocloud stocks were also down, with Nebius Group falling 4.5% and IREN dropping 3.8% in the premarket. Software company Oracle, which has expanded heavily into cloud computing, was down 1%.

BNP Paribas Equity Research senior analyst Daniel Wang is positive on CoreWeave stock, with a $169 target price. However, he argues CoreWeave needs to show it can generate sufficient cash flows to its obligations without continued reliance on external capital.

"At these levels, we believe traditional [...] debt financing becomes increasingly uneconomic, likely leaving convertible debt and equity issuance as the primary source of incremental corporate capital until credit investors gain greater confidence in the company's ability to be self funding," Wang wrote in a research note Thursday.

CoreWeave said Wednesday that its revenue backlog should more than support the payment for all of its debt obligations, without needing customers to renew their contracts or finding new tenants for the properties.

One believer is ARK Invest's Cathie Wood, who bought 192,566 shares of CoreWeave across her company's funds on Thursday, according to a daily trading notice. That comes after ARK picked up 188,665 CoreWeave shares on Wednesday.

Wood, ARK's CEO and chief investment officer, has built a reputation on the back of "moonshot" sectors such as genomics and robotics, having made her reputation with significant bets on Elon Musk's Tesla.

However, that has delivered mixed performance. The ARK Innovation ETF, or ARKK -- Wood's largest fund -- has delivered an annualized loss of around 4% over the past five years.

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