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CoreWeave (CRWV) stock price continued its downward trend this week as investors remained concerned about the AI bubble. CRWV has dropped in the last four consecutive days, reaching its lowest level since May this year. It has slumped by ~65% from its highest point this year.

CoreWeave stock is facing elevated risks

CoreWeave, a top company in the AI infrastructure industry, has come under pressure in the past few months. After soaring to $186 earlier this year, it has slumped to $64, and the situation is getting worse by the day.

Concerns about the company and the industry have escalated after the recent Oracle earnings. While the topline figures were strong, the company reported a negative free cash flow and debt. 

Most importantly, investors are concerned about its remaining public obligations (RPO), which have jumped to a record $523 billion. Some analysts question whether this figure is real as some of its clients, especially OpenAI, are not yet profitable.

CoreWeave is facing similar concerns as it counts OpenAI as its biggest customer, with a significant market share of its huge backlog.

Meanwhile, investors are also concerned about its massive debt, which has jumped to $25 billion. It is using this debt to fund its data center infrastructure, with the management estimating that the capex will be between $12 billion and $14 billion. It also estimates that the figure will be more than double what it spent this year.

Competition in the neocloud industry is rising

The company is now contending with the rising competition in the neocloud industry. More companies have come up recently and started to take market share in the sector. 

For example, IREN, a Bitcoin miner, is investing heavily in the sector and has now received a $9.7 billion order from Microsoft. Hut 8 Mining received a huge order from Anthropic, the creator of Claude. 

Terawulf, another Bitcoin miner, received a large order from Google. Other companies that are slowly gaining market share are the likes of Lambda Labs and Nebius.

Estimates are that the demand for data center industry demand will continue rising in the coming years. In a note, McKinsey predicted that the projected data centers will need $6.7 trillion by 2030. It believes that capacity demand will keep rising, a move that will benefit a company like CoreWeave.

However, the risk is that the industry is now getting crowded, giving large hyperscalers a choice on the neocloud partner to use. It will also give them more negotiating power.

These concerns explain why the CoreWeave stock has crashed and why the short interest has soared to 10%.

CoreWeave share price technical analysis 

(Click on image to enlarge)

CRWV stock chart | Source: TradingView

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