CoreWeave, Inc. (NASDAQ:CRWV) saw its stock tumble 13.9% to $85.69 on Wednesday, wiping out approximately $7.3 billion in market capitalization. The sharp decline came after reports that Meta Platforms, Inc. (NASDAQ:META) is developing its own cloud computing business to sell artificial intelligence capacity, potentially reducing its reliance on third-party providers like CoreWeave.
Meta's Cloud Ambitions Shake Investor Confidence
Meta shares surged 8.8% to $612.91 on the news, which was first reported by Bloomberg and picked up by Reuters. According to the report, Meta is building a cloud unit to monetize its excess AI computing power. The company declined to comment, and Reuters noted it could not independently verify the information. Analysts at D.A. Davidson, led by Gil Luria, warned that such a move could disproportionately impact smaller cloud providers, stating that Meta may no longer need their services.
Customer Concentration Risk in Focus
The selloff highlights CoreWeave's heavy dependence on Meta. According to MarketWatch, Meta has infrastructure deals with CoreWeave totaling $35.2 billion, representing approximately 78% of CoreWeave's current market value of $45.16 billion. In April, CoreWeave announced a $21 billion contract with Meta for AI cloud capacity through 2032, partially tied to NVIDIA Corp.'s (NASDAQ:NVDA) Vera Rubin platform. CEO Michael Intrator had previously emphasized that leading companies choose CoreWeave for demanding workloads, but the latest development has shifted market focus from backlog growth to customer risk.
Financial Pressures Beyond Competition
CoreWeave's first-quarter results revealed additional challenges. Revenue more than doubled year-over-year to $2.08 billion, but the company posted a net loss of $740 million and net interest expense of $536 million. The revenue backlog stood at $99.4 billion, which includes performance obligations from committed customer contracts. However, the heavy debt burden and negative earnings underscore the capital-intensive nature of AI cloud infrastructure.
Analyst Divergence on CoreWeave's Prospects
Wall Street is split on the stock's outlook. Bernstein analyst Madison Rezaei maintained an Underperform rating with a $67 price target, arguing that if Meta builds a competing cloud business against Amazon.com (NASDAQ:AMZN), Microsoft Azure (NASDAQ:MSFT), and Google Cloud (NASDAQ:GOOGL), it would be problematic for CoreWeave. Conversely, Evercore ISI reiterated an Outperform rating and $150 target, noting that Meta's contracts are committed, long-term, take-or-pay agreements that are not cancellable. The $35 billion in Meta-related contracts accounts for roughly 35% of CoreWeave's Q1 backlog.
Market Context and Broader Implications
The news also dragged down Nebius Group N.V. (NASDAQ:NBIS), which has Meta exposure, with its shares falling 17.0% to $229.18. The broader market saw modest declines, with the Invesco QQQ Trust (NASDAQ:QQQ) down 1.5% and the SPDR S&P 500 ETF (NYSEARCA:SPY) nearly flat. The Nasdaq Composite slipped 0.66%, while the S&P 500 lost 0.22%. CoreWeave's recent financing activities, including an $8.5 billion delayed-draw term loan and a $2 billion Class A stock deal with NVIDIA, underscore its aggressive expansion strategy. The company also purchased $7.70 billion in property and equipment last quarter. Trading volumes are expected to be light as U.S. markets close early Friday, July 3, for Independence Day.
