CoreWeave (NASDAQ:CRWV) stock tumbled 9% today, with investors rattled by a wave of insider selling and renewed doubts surrounding its proposed acquisition of Core Scientific. The selling pressure underscores how quickly sentiment can swing for one of Wall Street’s most closely watched AI infrastructure names.
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The expiration of the IPO lockup period allowed insiders to unload millions of shares, putting heavy pressure on CRWV stock. Among them was CEO Michael Intrator, who sold 82,455 shares for nearly $8 million. At the same time, CoreWeave’s falling share price has reduced the implied value of its all-stock Core Scientific deal, leading to pushback from Core Scientific shareholders and adding another headwind. Layered on top of that is an earnings report that, while showing blockbuster revenue growth, also highlighted widening losses.
It’s a reversal for a stock that not long ago looked unstoppable. Since its March IPO, CoreWeave more than tripled at its peak as investors piled into anything AI-related. But volatility has been just as much a part of the ride, with shares now down 38% since the Q2 earnings call in mid-August.
That earnings release is where D.A. Davidson’s Gil Luria zeroes in, and it’s why the analyst believes there’s more pain ahead. Luria points to an unsustainable financial picture, as CoreWeave generated $200 million in operating income during Q2, but that was overwhelmed by $267 million in interest expense. Guidance suggests Q3 could be even worse, with management forecasting $160–190 million in operating income against $350–390 million in interest costs.
The imbalance stems from CoreWeave’s aggressive expansion strategy. To meet surging demand for compute power, the company is pouring billions into new data centers – $2.9 billion in capex last quarter alone, with $20–23 billion planned for the full year, most of it back-loaded into Q4. That level of spending will likely require an additional $10 billion in debt before year’s end. While backlog swelled to $30.1 billion, including a $4 billion expansion deal with OpenAI, Luria warns that backlog alone doesn’t fix the math if the company can’t cover its borrowing costs.
Management hopes its planned acquisition of Core Scientific will help ease the strain by giving it direct control over 1.3 gigawatts of data center capacity. But Luria isn’t convinced that vertical integration will offset the burden of relentless borrowing. In his view, CoreWeave remains “a business not worth scaling.”
If Luria is right, today’s 9% drop could be just one stop on a longer downward path. The analyst rates CRWV shares an Underperform (i.e., Sell) with a $36 price target, suggesting an additional 61% crash is in the cards. (To watch Luria’s track record, click here)
But not everyone on Wall Street is lining up behind that bearish stance. The broader analyst crowd is more divided: 9 Buys, 12 Holds, and 2 Sells combine for a Moderate Buy consensus. And despite the latest tumble, the Street’s $123.45 average price target still points to 34% upside from current levels. (See CRWV stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.