Image Source: Pixabay

CoreWeave stock price has been in a free fall this year, erasing billions of dollars in value. CRWV plunged from the year-to-date high of $186 to the current $74, with its market cap falling from $87 billion to $37 billion today. 

The recent CoreWeave plunge has coincided with the performance of other companies in the AI industry. Nebius stock has plunged by over 32% from the year-to-date high, while IREN has dropped by over 40%. Other firms like Bitfarm and Hive Digital have also pulled back. 

CoreWeave’s business is thriving

The ongoing CoreWeave stock crash is happening as investors remain concerned about the AI bubble and depreciation of its GPUs. The argument that we are in an AI bubble is that many of the big spenders have not been able to demonstrate their profitability.

These fears eased a bit after the latest Nvidia earnings, in which Jensen Huang, the CEO insisted that the company was seeing strong demand. He also downplayed concerns about the AI bubble as he boosted his forward guidance for the company. This explains why the CRWV stock price jumped by over 10% in the pre-market.

The most recent results showed that CoreWeave’s business was doing well, helped by large deals with companies like Microsoft and OpenAI. It recently announced a large $14.2 billion deal with Meta Platform.

The company also has a $10 billion deal with Microsoft and another big one with OpenAI, the owner of ChatGPT. 

Its results showed that the revenue exploded upwards by 134% to $1.4 billion, with its backlog jumping by 271% to $55.6 billion. Also, the adjusted EBITDA was $831 million, while its net loss was just $41 million. 

CoreWeave believes that its business will continue thriving in the coming months. Precisely, the management believe that its annual revenue will be between $5.05 billion and $5.15 billion, much higher than the $1.92 billion it made in the same period last year. 

Still, this growth will come at a cost as the company continues with its spending spree. It expects that the capital expenditure will be between $12 billion and $14 billion. 

The company is raising money through credit and equity. Its outstanding shares have jumped from 317 million in April to 384 million today, and this growth will accelerate. 

In addition to dilution risks, the company is also facing elevated competition risks as more companies move into the industry. 

For example, Nebius recently reached a big deal with Microsoft, while IREN reached a $9.7 billion agreement with Microsoft. More companies like Bitfarms, Hive Digital, and TeraWulf are also expanding to the industry. 

Therefore, there is a likelihood that future deals with hyperscalers will have a low profit margin. Also, there are chances that the company’s deal flow will decelerate.

CoreWeave stock price technical analysis

(Click on image to enlarge)

CRWV stock chart | Source: TradingView

The 12-hour chart shows that the CRWV stock price has been in a strong downward trend in the past few weeks. It has crashed from $152 to $74 today, erasing billions of dollars in value. The stock recently dropped below the key support level at $84.46, its lowest level in September.

CoreWeave stock price has moved below the 61.8% Fibonacci Retracement level, while the Relative Strength Index and the MACD indicators have continued to retreat.

Therefore, the stock will likely continue have a brief relief rally after the latest Nvidia earnings and then resume the downward trend, potentially to the 78.6% retracement level at $65.

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