CoreWeave (NASDAQ:CRWV) closed at $81.75 on Thursday, July 3, ahead of the U.S. Independence Day holiday, marking a steep 15.4% decline from the prior week's close. The sell-off came amid a broadly positive week for major indices, with the Dow, S&P 500, and Nasdaq Composite all notching gains of 2.0%, 1.8%, and 2.1%, respectively.
Meta's Cloud Ambitions Weigh on AI Compute Demand
The primary catalyst for CoreWeave's decline was a Bloomberg report, cited by Reuters, indicating that Meta Platforms (NASDAQ:META) is developing its own cloud service to offer spare AI compute capacity. While Meta has not confirmed the plans, and Reuters could not independently verify the story, the news sparked concerns among investors about the sustainability of CoreWeave's relationship with one of its largest customers.
Meta has committed $35.2 billion to CoreWeave through 2032, representing approximately 82% of CoreWeave's current market capitalization of $43.1 billion. This heavy concentration of revenue from a single client—Meta is now second only to Microsoft (NASDAQ:MSFT), which accounted for about 67% of CoreWeave's revenue last year—makes the company particularly vulnerable to shifts in Meta's strategy.
Nasdaq-100 Inclusion Fails to Stem Losses
The timing of the sell-off is notable. CoreWeave was added to the Nasdaq-100 index effective June 22, a move that typically triggers buying from index funds tracking over $800 billion in assets. Yet the stock closed at $111.29 on that day and has since fallen 26.5% to $81.75, indicating that index-related buying was insufficient to offset broader concerns.
Analyst Gil Luria of D.A. Davidson told Reuters that Meta "may not need them anymore," referencing the potential for Meta to internalize AI compute capacity. This sentiment has weighed heavily on CoreWeave's valuation, despite the company's massive $99.4 billion backlog—more than double its market cap.
Financials Show Growth but Thin Margins
CoreWeave reported strong first-quarter results in May, with revenue surging to $2.08 billion, more than double the prior year. CEO Michael Intrator called it the "strongest bookings quarter" in company history. Adjusted EBITDA margin stood at 56%, and the backlog reached $99.4 billion. However, the company also posted a net loss of $740 million, net interest expense of $536 million, and an adjusted operating margin of just 1%.
The market appears to be discounting the backlog, wary that a major customer like Meta could pivot to its own cloud service and reduce future purchases. This risk is amplified by Meta's contracts representing such a large portion of CoreWeave's market value.
SoftBank Enters Neocloud Space
Adding to the competitive pressure, SoftBank Corp. (TYO:9434) and SoftBank Group (TYO:9984) announced on July 2 the formation of SB Neo in the U.S., a neocloud business expected to launch services by the fiscal year ending March 2028. Masayoshi Son emphasized plans for "world-class AI infrastructure," including a 10-GW AI data center initiative. This signals that major players are entering the market, potentially squeezing margins for incumbents like CoreWeave.
Analyst Views and Technical Levels
Despite the sell-off, some analysts remain bullish. Rosenblatt maintained a Buy rating with a $250 price target, well above the current price. The consensus target is $137.32. However, shares now trade much closer to their 52-week low of $63.80 than the high of $166.22.
Key technical levels to watch include Thursday's low of $80.56. Trading volume on July 1 spiked to 60.85 million shares, roughly double the recent average, indicating strong investor interest on the downside.
With no confirmed events on CoreWeave's calendar this week, the focus shifts to broader market catalysts, including the Federal Reserve minutes on Wednesday and early earnings from Delta Air Lines (NYSE:DAL) and PepsiCo (NASDAQ:PEP). For CoreWeave, the immediate concern remains whether Meta's cloud plans materialize and how the company can diversify its customer base to reduce dependence on a single client.
