CoreWeave's (CRWV) steep sell-off this week reflects investors repricing the cost of funding its AI infrastructure expansion rather than questioning demand for its compute capacity, leaving Wall Street divided on whether the stock's decline presents a buying opportunity or a warning sign.
Shares of CoreWeave tumbled almost 25% this week after a surge in the company's bond yields reignited concerns over its debt-funded growth model, with investors increasingly focused on how much future capacity additions will cost to finance. The stock rebounded 5.9% on Thursday, however, after Nvidia CEO Jensen Huang defended the company's financial position, saying CoreWeave's "strength is improving every day" and that its cost of capital is declining.
Shares plunged again Friday, dropping 12% in the four-day trading week that was shorted by Monday's holiday. CoreWeave's stock is now down 57% in the past year.
Research notes show the central debate is no longer around AI demand, which remains robust, but whether CoreWeave can continue funding one of the industry's most aggressive data-center buildouts without materially eroding shareholder returns.
Bernstein analysts said the market is finally assigning a higher risk premium to the company's financing needs.
CoreWeave remains heavily reliant on external capital, with roughly $35 billion of debt and substantial lease liabilities, while unsecured bond yields approaching 15% raise questions about the economics of future growth, the analysts said. Bernstein maintained its underperform rating, saying the company's long-term business model remains economically challenged despite strong demand trends.
J.P. Morgan, however, said the selloff appears disconnected from underlying fundamentals, arguing that demand for AI infrastructure has strengthened rather than weakened in recent months. The bank said most of CoreWeave's capacity is backed by long-term take-or-pay contracts and that project-level returns remain above the company's cost of capital, even after the recent rise in funding costs.
BofA Securities reiterated its buy rating, pointing to more than $129 billion in contracted backlog, strong execution in bringing power capacity online and financing structures supported by customer prepayments and investment-grade counterparties. The recent decline primarily reflects broader concerns around financing AI infrastructure rather than any deterioration in CoreWeave's operating outlook, the bank said in a note to clients.
"While these contracts represent a significant portion of contracted backlog, we believe CoreWeave has been effective in diversifying its customer mix over the past 18 months," BofA Securities said. "In addition to Meta and OpenAI, the company's customer base includes Microsoft, Jane Street, Mistral, and others, highlighting the broadening demand for AI infrastructure across both AI labs and enterprise customers."