Due to growing financial strain on the so-called neocloud startup, Morgan Stanley lowered its price objective for CoreWeave from $99 on Friday to $70. The new target suggests a potential increase of 26% from Thursday’s closing price. Shares of CoreWeave, down 2% on Friday, has experienced a sell-off over the past week due to investor concerns regarding its substantial debt associated with artificial intelligence.
Its bond yields have also surged, while the spread on its credit default swaps – which serve as insurance against default – has expanded to levels typically regarded as distressed. Morgan Stanley believes CoreWeave’s execution has been solid and said it “remains the speed and scale leader in a crowded neocloud ecosystem.”
“However, growing financing uncertainty reduces visibility into the path to deploying existing contracted capacity and achieving 8 GW [gigawatts] (active) longer-term,” said analyst Adam Wood. He sees a multitude of outcomes for CoreWeave’s future financing, “though the most reasonable path forward would likely be through securing a portion of the financing via a hyperscaler agreement to obtain a more attractive rate.”
