CoreWeave Stock Down 56% From its Peak — HSBC Sees More Pain Ahead

CoreWeave Inc. (NASDAQ:CRWV) shares closed at $61.39 on Monday, about 56% below their 52-week high of $139.93. HSBC sees more downside ahead for the AI cloud provider. HSBC analysts maintained a Reduce rating and a $39 price target in a note published Monday. The target implies 36.5% downside from Monday’s close. The firm left its non-GAAP earnings estimates unchanged, and those forecasts remain far below Wall Street consensus. CRWV stock is sinking. See the chart and price action here. Neocloud Model Under Pressure HSBC argues CoreWeave faces structural disadvantages against hyperscalers. The firm expects CoreWeave to generate about $12 million in annual revenue per megawatt in 2027, compared with $17 million to $18 million for hyperscalers. Large cloud providers rent capacity under more lucrative short-term contracts, according to the note. They also run differentiated general-purpose cloud businesses and serve many smaller customers who buy the full technology stack. Neoclouds, by contrast, earn most of their revenue from large customers renting commoditized bare-metal GPU instances. Read Also: We Asked ChatGPT, Grok and Claude For 1 Stock to Buy This Week. No One Picked Tesla. Short-Term Contract Boom Could Fade Between May and September, neocloud operators signed several lucrative short-term deals. CoreWeave signed three- to six-month contracts in September at roughly $40 million per megawatt annually, HSBC said. SpaceX (NASDAQ:SPCX) also struck deals with Anthropic and Alphabet Inc.‘s (NASDAQ:GOOGL) (NASDAQ:GOOG) Google worth an estimated $22 million to $50 million per megawatt each year. HSBC now sees risks to the trend. Growth among LLM providers has slowed slightly, which could soften demand for spot compute capacity. Rising yields and debt market strain could also stop neoclouds from building speculative capacity, the kind typically offered under those high-priced short-term contracts. See More: Top Momentum Stocks Estimates Far Below Consensus HSBC’s non-GAAP EPS estimates for 2028 through 2030 sit 50% to 70% below consensus. Over the long term, the firm expects CoreWeave to post a non-GAAP operating margin of 15% to 16%, while management has guided for about 25%. Debt Fears Deepen CoreWeave lost roughly a quarter of its value last week as investors questioned how it would finance its AI buildout, and the slide continues. Shares fell 4.16% to $58.58 in Tuesday premarket trading, a new 52-week low, per Benzinga Pro data. Bulls Push Back Other analysts see the selloff as overdone. Goldman Sachs upgraded CoreWeave to Buy from Neutral on Monday, though it cut its price target to $106 from $139. Analyst Gabriela Borges said investors may be overestimating the company’s future borrowing costs. Evercore ISI maintained an Outperform rating and a $150 target. Senior Managing Director Amit Daryanani told CNBC much of CoreWeave’s debt is backed by contracts with Meta Platforms Inc. (NASDAQ:META), Microsoft Corp. (NASDAQ:MSFT) and OpenAI. HSBC’s $39 target sits far below both. CRWV Stock Price Activity: CoreWeave stock was down 3.98% at $58.68 during premarket trading Tuesday, according to data from Benzinga Pro. Read Also: Netflix Stock Has Fallen After 5 Straight Reports: Will Q3 Break the Streak? Photo: jackpress / Shutterstock