CoreWeave Inc shares closed at $61.39 on Monday, marking a 56% decline from their 52-week high of $139.93. The AI cloud provider faces continued pressure as HSBC analysts maintained a Reduce rating and a $39 price target, implying significant further downside.

Structural challenges vs hyperscalers

HSBC argues that CoreWeave faces inherent disadvantages compared to major hyperscalers. The firm projects CoreWeave will generate approximately $12 million in annual revenue per megawatt in 2027, whereas hyperscalers are expected to achieve $17 million to $18 million. Large cloud providers benefit from more lucrative short-term contracts and differentiated general-purpose businesses serving a broader customer base. In contrast, neoclouds primarily earn revenue from large customers renting commoditized bare-metal GPU instances.

Short-term contract risks

Between May and September, neocloud operators signed several lucrative short-term deals. CoreWeave secured three- to six-month contracts in September at roughly $40 million per megawatt annually. SpaceX also struck deals with Anthropic and Alphabet’s Google worth an estimated $22 million to $50 million per megawatt each year. However, HSBC notes risks to this trend, including slightly slowed growth among LLM providers and potential debt market strain limiting speculative capacity building.

Divergent analyst views

While HSBC remains bearish, other analysts view the selloff as overdone. Goldman Sachs upgraded CoreWeave to Buy from Neutral on Monday but cut its price target to $106 from $139. Analyst Gabriela Borges suggested investors may be overestimating future borrowing costs. Evercore ISI maintained an Outperform rating with a $150 target, noting that much of the company’s debt is backed by contracts with Meta Platforms, Microsoft Corp., and OpenAI.

What the numbers show

The divergence between HSBC’s long-term margin expectations and management guidance highlights the core dispute. HSBC expects a non-GAAP operating margin of 15% to 16% over the long term, while management has guided for approximately 25%. Additionally, HSBC’s non-GAAP EPS estimates for 2028 through 2030 sit 50% to 70% below consensus, indicating a fundamental disagreement on profitability sustainability rather than just near-term sentiment.

CoreWeave Inc. shares fell more than 3% in Tuesday's premarket trading, hitting a new 52-week low of $58.58. The decline reflects deepening investor concerns over rising borrowing costs and heavy debt loads for the AI cloud provider.

The sell-off contrasts with bullish views from JPMorgan and Evercore ISI, who argue that strong demand and high-credit-quality contracts mitigate financing risks. However, Goldman Sachs downgraded its price target while upgrading the rating to Buy, and technical indicators show a persistent downtrend.

Analysts counter debt concerns

JPMorgan analyst Samik Chatterjee maintained an Overweight rating, arguing that investor fears are overblown. He linked the selloff to rising bond yields and a Gartner forecast questioning AI data center profitability. Gartner estimates owners need $8.5 trillion in cumulative revenue through 2030 to earn a 12% return on invested capital, yet forecasts no more than $3.6 trillion in AI revenue during that period.

Chatterjee notes CoreWeave differs from peers by selling capacity through long-term take-or-pay contracts before bringing it online. As of Aug. 11, contracted power capacity reached 4.2 gigawatts, with total active power at 1.5 gigawatts after adding nearly 500 megawatts in Q2.

Evercore ISI Senior Managing Director Amit Daryanani also maintained an Outperform rating with a $150 price forecast. He told CNBC that investors are focusing on a small portion of unsecured debt yielding 14% to 15%, while much of the debt is backed by contracts with Meta Platforms, Microsoft, and OpenAI carrying financing costs of about 5.5%. Daryanani noted GPU rental prices rose 15% to 20% per quarter over the past two quarters.

Goldman Sachs adjusts price target

Goldman Sachs analyst Gabriela Borges upgraded CoreWeave to Buy from Neutral but lowered the price forecast to $106 from $139. Borges said investors may be overestimating future borrowing costs while overlooking potential improvements in returns. She noted CoreWeave raised computing prices by 25% in July and another 10% in October, reflecting strong demand.

However, Goldman warned that financing costs and shifts in AI computing demand remain key risks. Meanwhile, the yield on CoreWeave’s 2031 bonds fell to 15.13% from more than 16% last week, according to Tradeweb data.

Market sentiment and technical outlook

Great Hill Capital Chairman Thomas Hayes warned that bond investors remain skeptical and could demand higher yields to finance AI infrastructure growth. Grant Nachman of Shorecliff Asset Management stated current market conditions could make large unsecured loans to neocloud providers prohibitively expensive. John Yovanovic of MetLife Investment Management highlighted concerns about substantial debt supply expected over the next 18 months.

Technically, CoreWeave remains in a bearish trend. At a reference price of $59.14, the stock trades approximately 27.5% below its 20-day simple moving average of $81.75 and 36% below its 200-day average of $92.39. The relative strength index stands at 29.05, indicating oversold conditions, though this does not guarantee a rebound. The stock remains under pressure from a death cross formed in July.

What the numbers show

A divergence exists between CoreWeave’s aggressive capital outlay and its immediate return profile. The company reported $640 million in second-quarter net interest expense, a significant increase from $267 million in the previous year. This rise in financing costs occurs while total debt and lease obligations stand at roughly $52 billion.

The disclosed borrowing cost of approximately 9% contrasts sharply with the cited return of around 1%, highlighting the pressure on margins if revenue growth does not accelerate sufficiently to cover these rising fixed costs. However, Evercore estimates recent contracts generate approximately $20 million in annual revenue per megawatt, compared with a historical range of $10 million to $11 million, suggesting unit economics may be improving even as financing costs remain elevated.