CoreWeave (NASDAQ: CRWV) shares fell 4.17% to $58.57 in premarket trading on Tuesday, extending their recent decline after HSBC Global Investment Research maintained its ‘Reduce’ rating and $39 price target.
The bank warned that rising borrowing costs and a potential slowdown in demand for AI computing could hurt the company’s long-term profitability.
HSBC’s target implied a 36.5% downside from Friday’s $61.39 closing price, which the bank used in its October 19 assessment.
The bank questioned whether CoreWeave, which provides computing capacity to AI developers including Microsoft and OpenAI, can generate returns comparable to larger cloud providers while financing expensive infrastructure expansion.
CoreWeave’s Selloff Puts Borrowing Costs in Focus
The latest premarket decline follows a 25.2% drop last week, CoreWeave’s worst weekly performance since November. Shares fell another 0.44% on Monday after touching $59.25, a new 52-week low during regular trading. Tuesday’s premarket quote was below that level.
Trading volume also remained elevated. Approximately 101 million shares changed hands Monday, compared with a three-month average daily volume of about 33.3 million, marking unusually heavy activity during the recent selloff.
High bond yields have added to concerns about CoreWeave’s ability to fund future expansion. According to Reuters, the yield on its bonds maturing in 2031 declined to 15.13% on Monday, down from more than 16% last week. These secondary-market yields leave the fixed interest payments on existing bonds unchanged but reflect the higher returns investors require to hold CoreWeave debt.
HSBC cautioned that higher financing costs could make additional computing capacity more expensive to build, particularly if customers become less willing to commit to capacity before it is available.
HSBC Sees Lower Revenue per Megawatt Than Larger Cloud Providers
HSBC estimates CoreWeave will generate approximately $12 million in annual revenue per megawatt of computing capacity in 2027, compared with $17 million to $18 million for larger cloud providers. The bank attributes the difference partly to established cloud companies’ broader service offerings and more diversified customer bases.
The forecast contrasts with CoreWeave’s September disclosure of new short-term computing contracts priced at approximately $40 million per megawatt on an annualized basis. Those agreements have three- to six-month terms, so the annualized pricing figure does not represent revenue guaranteed over a full year or a companywide average.
HSBC warned that slower growth among large language model (LLM) developers could reduce demand for short-duration contracts, limiting opportunities to generate revenue from additional computing capacity.
The bank’s non-GAAP earnings-per-share estimates for 2028 through 2030 remain 50% to 70% below consensus forecasts. HSBC also projects a long-term non-GAAP operating margin of 15% to 16%, while CoreWeave has established a long-term adjusted operating income margin target of 25% to 30%.
Goldman Sachs offered a different assessment on Monday, upgrading CoreWeave from Neutral to Buy. Analyst Gabriela Borges argued that investors were overestimating the company’s future cost of capital and underestimating potential investment returns. Goldman also expected constrained AI computing supply and CoreWeave’s competitive position among specialized cloud providers to support higher annual recurring revenue per megawatt over the next two years.
CoreWeave reported approximately $104.2 billion in revenue backlog as of June 30, excluding more than $25 billion in additional net customer commitments secured early in the third quarter. The backlog represents revenue expected under customer contracts, subject to the company meeting service delivery and availability requirements, rather than revenue already earned.
Separately, CoreWeave Tokenized bStocks (CRWVB) traded at $58.36, down 6.66% over the previous 24 hours, according to CoinMarketCap. The tokenized instrument trades separately from CoreWeave’s Nasdaq-listed shares, and its 24-hour performance covers a different measurement period from the stock’s premarket decline.
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