These Risks Could Send CoreWeave Stock (CRWV) Plunging by 40%

CoreWeave (CRWV) has become one of the most closely watched names in the AI infrastructure space. However, with analysts assigning an average price target that implies nearly 40% downside from current levels, investors are beginning to question whether the stock’s lofty valuation can be sustained. While the company is riding strong tailwinds from AI demand, several risks could push the stock lower.

Valuation Is a Big Concern

One of the biggest concerns for CoreWeave is its valuation. The stock trades at roughly 23 times its revenue, which is well above the industry average of 3.3x. This leaves little room for error and makes CRWV vulnerable to any slowdown in growth, especially since it is running huge losses in order to fund its expansion. The company’s recently announced $9 billion all-stock acquisition of Core Scientific (CORZ) further complicates things. Indeed, analysts at Needham and others have pointed out that the deal lacks typical protections, such as price collars.

This means that if CoreWeave’s share price drops before the merger is completed, shareholders of both companies could be exposed to even greater downside. This would be because the CORZ investors who receive the new CRWV stock might decide to sell if the price falls below a point they are uncomfortable with. Additionally, insider lockups are set to expire soon, and large investors, such as Magnetar Financial, could sell shares if they are anxious about taking profits at these elevated levels, which would put additional pressure on the stock.

Beyond valuation concerns, the company also faces operational and structural risks. CoreWeave’s capital expenditures for 2025 are estimated to be between $20 billion and $23 billion, which is more than quadruple its projected revenue of $4.9-$5.1 billion. That kind of aggressive investment will strain cash flows if growth slows down or costs rise, and will add to its already massive debt load. The company is also highly reliant on a small number of customers, including OpenAI and Microsoft (MSFT). As a result, a delay or reduction in spending from either could significantly impact CoreWeave’s revenue.

There Are Still Upside Catalysts Worth Noting

Despite these risks, CoreWeave does have meaningful upside catalysts that are worth noting. Indeed, the acquisition of Core Scientific gives the company ownership of over 1.3 gigawatts of data center capacity and eliminates roughly $10 billion in lease liabilities. This could improve margins and free cash flow by up to $500 million annually by 2027, according to company estimates.

The company also reported a $26 billion backlog in Q1, including an $11 billion contract with OpenAI. This kind of demand visibility gives CoreWeave a solid foundation for long-term growth. Furthermore, its revenue in Q1 2025 rose 420% year-over-year to $982 million, which suggests that it is well-positioned to ride the ongoing AI boom. Additional upside could come from improved cost management. In fact, by using asset-backed financing to support infrastructure investments, CoreWeave could lower its cost of capital compared to traditional debt.

Is CRWV a Good Stock to Buy?

Overall, analysts have a Moderate Buy consensus rating on CRWV stock based on six Buys, 11 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average CRWV price target of $78.53 per share implies almost 40% downside risk, as mentioned before.

See more CRWV analyst ratings

At the end of the day, CoreWeave is a high-risk, high-reward stock. Its steep valuation and reliance on a few customers make it vulnerable to any slowdown or misstep. However, the strategic acquisition of Core Scientific, a massive backlog, and strong revenue growth suggest the company could surprise to the upside if it executes well. As a result, investors should keep a close eye on deal progress, customer concentration, and spending efficiency in the quarters ahead.