CoreWeave stock CRWV fell again on Friday after recovering in the previous session, putting the AI cloud computing company on track for a steep weekly loss as investors continued to worry about its debt-financed expansion amid rising borrowing costs.
The stock dropped about 7.2% on Friday, even as the S&P 500 edged higher.
Nasdaq Composite opened lower by about 0.4%.
CoreWeave shares have lost nearly 20% this week as concerns over inflation, interest rates and the financing requirements of artificial intelligence infrastructure weighed on sentiment.
In addition, Gartner released research indicating that by 2030, 80% of neocloud providers will most likely cease independent operations.
Rising borrowing costs put debt under scrutiny
For some analysts, CoreWeave has become a symbol of the debt-fuelled AI infrastructure boom, in which companies are committing billions of dollars to data centres and computing capacity before the long-term returns on that investment are fully established.
The sell-off intensified after hotter-than-expected US inflation data on Wednesday heightened concerns that interest rates could remain elevated, increasing the cost of financing capital-intensive AI infrastructure.
Nicholas Mugalli, chief investment officer at World Trade Securities, said CoreWeave short sellers made around $806 million in paper profit on Wednesday when the stock fell 15.5%.
CoreWeave’s $2.8 billion of 9.75% bonds issued in April traded at 79.5 cents on the dollar on Thursday, yielding more than 15%, according to data provided by BondCliQ.
The loss-making cloud computing company has about $50 billion in debt.
“A hot inflation print triggered a sharp selloff in CoreWeave because its business model is a highly indebted play on future data center demand,” BCA Research analysts said.
“Although the rest of the tech complex is also sensitive to the pace and magnitude of AI adoption and use, it is, on average, considerably less sensitive to interest rates”
CoreWeave rents out Nvidia graphics processing units and supplies computing power to AI laboratories such as OpenAI and major technology companies including Meta Platforms.
It operates data centres across the US and internationally.
The business depends on continued demand for computing capacity, while its expansion requires substantial upfront investment.
That combination has left investors weighing the strength of its contracted revenue against the risks associated with its debt and future capital expenditure.
Why neoclouds face a threat, but CoreWeave is likely to survive
Gartner said in 2026, AI providers are expected to spend nearly $1 trillion on AI infrastructure, and are forecast to invest an additional $6 trillion between 2027 and 2030, but enterprise and consumer AI revenue will be insufficient to support profitable returns on all planned AI capital expenditures during this period.
A cumulative $8.5 trillion in revenue would be required to recover the massive AI spend, according to Gartner; however, total enterprise and consumer AI revenue that can be attributed to AI data centers during this period is forecast to reach no more than $3.6 trillion, it said.
“Failure to achieve sustainable ROIC on rapidly depreciating assets would almost certainly necessitate write-downs,” it said.
Neoclouds will be among the most exposed to the imbalance between revenue and capital spending, and cost pressure and a lack of a differentiating business model will force over 80% of neocloud providers to cease independent operations, it said.
Melvin, Milk Road analyst, agreed but said CoreWeave and Nebius will be the top survivors.
“The majority of neocloud companies will NOT survive. I strongly believe we’re going to see a MASSIVE amount of consolidation across this industry over the next several years, and only a handful of companies will come out on top,” Melvin said.
“Personally, I think $CRWV and $NBIS will be the top 2,” he said.
Nvidia Chief Executive Jensen Huang, whose company is CoreWeave’s second-largest investor with an approximately 10% stake, sought to reassure investors about its financial position.
“CoreWeave’s financial strength is improving every day,” Huang told reporters at an event in Stockholm, adding that he did not see a need for Nvidia to backstop the company.
“I’m optimistic. Their cost of capital is actually decreasing.”
Analysts see buying opportunity
Cantor Fitzgerald reiterated its Overweight rating on CoreWeave, with a $176 price target implying upside of more than 150% from its reference price.
The firm said CoreWeave had public support from Nvidia and had sold nearly all the capacity scheduled to come online in 2027.
Nvidia has an agreement to backstop any unsold capacity.
According to Cantor Fitzgerald, the principal concern is whether CoreWeave can finance the capital expenditure required to meet demand, rather than whether demand for AI computing exists.
The firm described the current period as an attractive opportunity to add to or initiate a position in the shares.
Deutsche Bank also maintained its Buy rating on CoreWeave, with a $150 price target, implying upside of more than 100% from its reference price.
Analyst Brad Zelnick acknowledged that the company’s prospects are closely tied to the performance of the AI sector and demand for computing infrastructure.
He argued, however, that its underlying contracts provide meaningful support.
“The vast majority of CoreWeave’s backlog is associated with long-term take-or-pay contracts where contracted revenue fully covers all capital and operating costs associated with the contract and generates a return for the company,” Zelnick wrote.
He estimated that 60% to 65% of CoreWeave’s backlog was tied to investment-grade customers at the end of the second quarter.
The company has used these contracts to secure project-specific debt at costs at or below its parent company’s borrowing rate.
“A strong customer base, established record of execution, backlog conversion and leading infrastructure performance is all supportive of their issuer profile relative to neocloud peers, in our view,” Zelnick said.
Deutsche Bank also highlighted CoreWeave’s financing arrangements and liquidity position.
“Available liquidity stood at $15.5 billion, and since that time the company: closed a $2.6 billion DDTL 5.5 (backed by shorter 3-yr contracts) at SOFR + 5.50%; closed a $4.2 billion 2.875% Convertible Senior Note and announced a 35 million share ATM equity program,” the bank said.
Capital needs remain a key risk
Despite the positive assessment of its customer contracts, CoreWeave faces substantial funding requirements as it expands its infrastructure.
Deutsche Bank forecasts operating cash flow of about $10 billion over the next 12 months, compared with required capital expenditure of roughly $45 billion.
That gap means the company will need to secure additional funding, although Zelnick argued it could raise capital at a steady pace, supported by its contracted customer backlog.
The central question for investors is whether CoreWeave can convert its substantial order book into cash flow quickly enough to support its expansion without putting further pressure on its balance sheet.
For now, bullish analysts see long-term contracts, investment-grade customers and Nvidia’s support as reasons to look beyond the recent sell-off.
More cautious investors remain focused on the cost of financing the infrastructure boom and the risks of relying on future demand to justify heavy borrowing.
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