CoreWeave stock has been under intense pressure in the past few months, and this weakness may continue in the coming weeks as funding for artificial intelligence (AI) companies dries. It dropped to $54.87, down by over 70% from its peak. It has formed the alarming head-and-shoulders pattern, pointing to a bearish breakout in the near term.
AI funding is drying up
There are signs that investors are getting jittery about funding companies in the artificial intelligence industry. Firmus, an Australian company, recently pulled its initial public offering as investors pushed back against its $30 billion valuation.
The most notable red flag came out recently after OpenAI, a top CoreWeave client, raised just $11 billion. While the amount was huge, it was much lower than the $30 billion that the company was seeking.
Nscale, the biggest British neocloud company, is also facing pushback as it seeks a $35 billion valuation.
The risk is that if a company like OpenAI cannot access enough capital, other AI companies, especially neoclouds will have a rough patch. Just last week, Elon Musk warned that investors were skeptical about funding unprofitable AI companies. He expects that over 200 of these neocloud companies will go bankrupt.
CoreWeave is facing major challenges as investors grow increasingly skeptical about its business. As a result, its bond yields have jumped to 15% in the secondary market, well above the 9% coupon the company set when it raised the funds.
The challenge is that the company will need to raise more money in the foreseeable future to hit its data center goals. It plans to spend between $30 billion and $39 billion this year. While it has not offered its guidance for next year, there is a likelihood that it will spend a similar amount.
CoreWeave earnings to provide color on its business
The next important catalyst for CoreWeave is the upcoming earnings by some of the biggest companies in the AI space. Some of the most notable ones are Advanced Micro Devices (AMD) and Arm Holdings.
CoreWeave will then publish its earnings on November 10. Analysts are optimistic that its revenue growth will be strong. The average estimate among analysts is that its revenue jumped by 159% to $3.54 billion, helped by its large deals with companies like Jane Street, OpenAI, and Microsoft.
Its annual revenue is expected to hit $12.87 billion, followed by $26.47 billion next year. While this earnings growth is strong, analysts are concerned about its cash burn and how it will finance its operations.
CoreWeave stock technical analysis
CRWV stock chart | Source: TradingView
Technicals suggest that CRWV stock has more downside to go and may even hit its all-time low of $33.47. It has formed a head-and-shoulders pattern, whose neckline is at $63.67. It has already dropped below that level and retested it.
The stock has also remained below the 50-day moving average. Therefore, these technicals suggest that it may drop further in the near term. If this happens, the next key level to watch will be at $33, its all-time low.
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