CoreWeave stock keeps falling as fears of AI spending drag down markets. Here’s the latest on what’s happening

Shares of CoreWeave Inc. (Nasdaq: CRWV) have fallen more than 25% in the last week as concerns grow over the company’s debt and the success of the “neocloud” industry as a whole. 

On Thursday, the cloud-computing company’s stock fell up to 7% during premarket as investors continued to fret about potential overspending on AI. The decline followed a drop of 15.46% during the previous trading day.

AI-adjacent companies across the globe are seeing similar losses, including semiconductor firms such as South Korea-based SK Hynix, whose U.S.-listed shares fell more than 6% during the day, and Sandisk, which dropped over 5% in premarket trading. 

Markets dipped overall, with South Korea’s Kospi index falling more than 7% on Thursday and the Nasdaq-100 falling over 2% on Wednesday. 

What’s causing AI shares like CoreWeave to drop?

Part of the concern comes from Gartner, a market research firm. 

On Wednesday, Gartner predicted that over 80% of neocloud providers could close by 2030 as a result of cost pressure and “a lack of a differentiating business model.” It expects much of the neocloud market to consolidate over the next four years. 

Gartner explained that, by the end of the decade, “over $3.5 trillion of AI infrastructure spending could be exposed to impairment.”

The firm’s research found that relying on enterprise and consumer AI revenue alone wouldn’t be enough for many AI companies to see profitable returns. 

“Through 2030, AI data center owners would need to generate a cumulative $8.5 trillion in revenue to cover announced capital spending, financing costs, and a 12% return on invested capital (ROIC), which we assume to be the hurdle rate of investment capital,” Gartner’s senior director analyst Will Sommer explained.

Looking at CoreWeave specifically, there are concerns about its level of debt. “Its unsecured bond yields have approached 15%—levels typically associated with distress,” Bernstein analyst Madison Rezaei said in a report, according to Investor’s Business Daily. 

Rezaei continued: “The market is demanding substantially more compensation to own CoreWeave’s unsecured credit: its 2032 bond now yields approximately 14.8%, versus a 9.625% coupon.”

However, CoreWeave CEO Mike Intrator has said the company has more than enough deals in its backlog to manage its debt, Bloomberg reports, citing an internal memo. 

According to the publication, Intrator told staff the market was to blame, not the company’s business model.

“When you are building a new type of technology company, there will be periods of time when the market misunderstands and acts irrationally,” Intrator is quoted as saying. “We are confident in our business model, our customers, the extraordinary quality of our execution, and the relentless discipline around the financial engine we have built.”

Fast Company reached out to CoreWeave for comment on the memo.

Intrator pointed to CoreWeave’s rivals as part of the problem, blaming their “weakness and delays surrounding the attempted IPOs and debt financings” for impacting how CoreWeave is viewed.

CoreWeave stock has underperformed the market this year. As of Wednesday’s close, shares were down 17.07% year to date, compared to a 14.88% increase for the broader Nasdaq Composite.