Famed investor Cathie Wood has made another significant purchase of CoreWeave stock, acquiring 136,000 shares across her Ark Investment Management ETFs this week. This move comes despite the AI infrastructure company's stock (CRWV) being halved over the past six months and continuing a sharp decline, having dropped for four consecutive days to reach its lowest level since May—a fall of approximately 65% from its yearly high.
The bearish sentiment is fueled by deep structural concerns about CoreWeave's business model. The company, a major player in providing cloud infrastructure for AI, is grappling with a capital-intensive strategy reliant on heavy debt financing. Its operating margin sits at about 4.0%, while it borrows at a much higher rate of 7.5%, creating a sustainability issue where profits cannot cover interest costs. CoreWeave's debt has ballooned to $25 billion, used to fund data center infrastructure with an estimated capital expenditure between $12 billion and $14 billion.
Investor anxiety escalated following Oracle's recent earnings report, which, despite strong top-line figures, revealed negative free cash flow and a jump in remaining performance obligations (RPO) to a record $523 billion. Analysts question the realism of this figure, especially as key clients like OpenAI are not yet profitable. CoreWeave faces similar scrutiny as OpenAI is its biggest customer, constituting a significant portion of its huge backlog.
Competition in the "neocloud" industry is intensifying, threatening CoreWeave's market position. Companies like Bitcoin miners IREN, Hut 8 Mining, and Terawulf are making major inroads, securing billion-dollar orders from tech giants like Microsoft, Anthropic, and Google. Other players like Lambda Labs and Nebius are also gaining share. While long-term demand for data centers is projected to be massive—McKinsey estimates a need for $6.7 trillion by 2030—the crowding market gives large hyperscalers more choice and negotiating power, squeezing providers like CoreWeave.
Technically, the stock chart paints a bleak picture. CRWV has crashed below the crucial $84.87 support level (the neckline of a double-top pattern), and has also moved below its 50-day and 100-day Exponential Moving Averages. The Relative Strength Index (RSI) and MACD indicators are pointing downwards, with some analysis suggesting a potential further drop to the $50 psychological level. Short interest in the stock has soared to 10%.
Despite the overwhelming bearish signals, Wall Street's consensus rating on CRWV remains "overweight," with a mean price target of about $125, suggesting a potential 40% upside from current levels. This stands in stark contrast to the critical view of the company's fundamentals, creating a significant divergence between narrative-driven optimism and the harsh financial realities of debt, competition, and profitability delays.
