CoreWeave stock crashes 15%, falls further as AI slowdown fears and debt woes hit

CoreWeave stock crashed 15% and fell 6% further as AI slowdown fears, rising bond yields, heavy debt and Gartner's warning hit investor confidence.

CoreWeave shares continued to fall on Thursday after a sharp drop on Wednesday. The stock of AI computing company CoreWeave (CRWV) plunged 15% on Wednesday and fell another 6% in pre-market trading on Thursday, extending a difficult week for the company.

CoreWeave shares fall as AI slowdown fears and debt concerns weigh on investors.

Investors are worried about CoreWeave's debt and business model. The company has taken on heavy debt, and investors are concerned about whether its business can remain profitable if demand for artificial intelligence (AI) slows down. These concerns have put further pressure on its stock and bonds.

CoreWeave stock outlook

Bernstein remains negative on CoreWeave's long-term business outlook. Bernstein analyst Madison Rezaei said in a note on Thursday that the company's long-term business model continues to face economic challenges, according to Yahoo Finance. The analyst maintained an “Underperform” rating on the stock, indicating that Bernstein expects it to perform worse than the relevant market benchmark.

CoreWeave debt fears

Fears of a slowdown in AI spending have hurt CoreWeave's corporate bonds. Investors continued selling the company's bonds across different maturity periods on Wednesday. Bond prices generally fall when investors sell them, pushing their yields higher. The sell-off reflects concerns about a possible slowdown in AI and the impact it could have on CoreWeave's already weak financial position.

Rising bond yields also caught Elon Musk's attention. The increase in yields on CoreWeave's bonds prompted Musk to respond with the word “Yikes” on X. He was reacting to a post by venture capitalist Chamath Palihapitiya about the situation, according to Yahoo Finance.

AI slowdown fears

A Gartner report added to concerns about the future of AI infrastructure companies. Research firm Gartner forecast that more than 80% of neocloud providers could stop operating independently by 2030. It said cost pressures and a lack of a distinct business model would force these companies to shut down, merge with other businesses or otherwise lose their independence.

CoreWeave belongs to the neocloud category mentioned in the report. Neocloud companies provide computing infrastructure, including access to powerful chips and other resources needed to develop and run AI systems. Gartner's warning raised concerns about whether companies in this sector can manage their costs and build businesses that stand out from competitors, according to Yahoo Finance.

The Gartner forecast added to the pressure on CoreWeave's stock. The report raised questions about the long-term survival of neocloud providers at a time when investors were already worried about CoreWeave's debt and the possibility of slower AI demand. These concerns contributed to the negative market sentiment surrounding the company.

CoreWeave business model

CoreWeave pushed back against the criticism but failed to calm investors immediately. The company argued that not all AI infrastructure providers operate in the same way. It said some competitors are trying to raise large amounts of money without having the execution capabilities, revenue, scale or software solutions that CoreWeave offers its customers.

CoreWeave said market confusion can affect companies building new technology businesses. In its statement to Yahoo Finance, the company said the market is dynamic and includes many different players. It added that companies developing new types of technology can go through periods when investors misunderstand their businesses and react irrationally.

The company expressed confidence in its customers and business operations. Despite the market pressure, CoreWeave said it remained confident in its business model, customers and execution. It also highlighted what it described as the quality of its operations and the financial discipline behind its business.

CoreWeave's immediate challenge is to convince investors that its business can withstand financial and industry pressures. Its falling stock and bond prices show that concerns about debt, AI demand and the future of neocloud providers are weighing on investor confidence. The company's response has defended its strategy, but investors remain focused on the risks facing its business, according to Yahoo Finance.