On October 23, UBS lowered its price target on AI cloud computing company CoreWeave, Inc. (NASDAQ: CRWV) from $120 to $105, while maintaining its "Buy" rating. The firm noted that CoreWeave shares have fallen 37% since the start of October, reflecting continued weakening investor confidence in the financing capabilities and long-term profitability prospects of new-type cloud computing (Neocloud) enterprises. Meanwhile, the cost of CoreWeave's credit default swaps (CDS) has risen to a new high, further indicating that market concerns about its debt risk are intensifying. UBS stated it is reassessing the company's credit condition and expects that restoring investor confidence could take several quarters.
Shares Plunge 37% This Month as Capital Shifts Toward Microsoft and Amazon
CoreWeave has faced sustained selling pressure recently, with its share price at approximately $54.75 at the time of reporting, close to its 52-week low of $53.50 and down about 61% from its 52-week high of $141.79. Over the past six months, the company's shares have cumulatively declined more than 52%, including a 37% drop since the start of October alone. UBS pointed out that CoreWeave's decline is not an isolated event, as AI infrastructure-related companies including Oracle have similarly faced market pressure recently. In contrast, Microsoft and Amazon shares have risen over the same period, indicating that investors are adjusting their AI industry portfolios and increasingly favoring large technology companies with stable cash flows and stronger financing capabilities. This shift reflects a changing focus in the market's attention toward AI infrastructure investments. Previously, investors primarily focused on computing power demand growth and long-term order scale, but as capital expenditures continue to expand and financing costs rise, whether companies can obtain funding at reasonable costs and fulfill contracts is becoming a key factor affecting stock prices.
$129 Billion in Orders Still Requires $20 Billion in Financing as Debt Risk Becomes Core Concern
CoreWeave currently has approximately $129 billion in remaining performance obligations (RPO), representing the portion of signed contracts for which revenue has not yet been recognized. The massive contract scale indicates that customer demand for its AI computing services remains strong, but to convert these orders into actual revenue, the company still needs to continue building data centers, procuring GPUs and related infrastructure. Bank of America Securities noted that CoreWeave still needs to raise approximately $20 billion in additional funding to meet the computing power demand corresponding to its existing contracts. For a data center operator that relies on large-scale external financing for expansion, rising funding costs could directly impact project returns, cash flow, and future profitability. Meanwhile, CoreWeave's credit default swap costs have risen to a new high. Rising CDS prices typically mean investors are demanding higher credit risk compensation, reflecting heightened concerns about the debt repayment risk involved. UBS stated it is re-examining CoreWeave's credit condition and believes it could take several quarters for investor confidence to recover. This means that even if computing power demand remains strong, the company will still need to gradually alleviate market concerns about debt risk through financing progress, project delivery, and cash flow performance.
Wall Street Price Target Divergence Widens as Morgan Stanley Cuts to $70
As CoreWeave shares continue to decline, multiple Wall Street institutions have adjusted their price targets, but their assessments of the company's future prospects differ significantly. Among them, Morgan Stanley lowered its CoreWeave price target from $99 to $70, primarily due to concerns about uncertainty in financing prospects. HSBC maintained its "Underweight" rating and $39 price target, taking a more cautious stance on the company's valuation and future performance. In contrast, Cantor Fitzgerald continued to maintain its $176 price target, believing that CoreWeave does not have a demand shortage problem and that customer demand for computing power remains strong. The firm previously noted that the economics of the company's newly signed contracts have improved significantly, with the capital expenditure payback period nearly halved. Bank of America Securities also maintained its "Buy" rating and $140 price target, primarily bullish on CoreWeave's massive signed order backlog, but also noted that the company needs to continue raising substantial funds to meet delivery requirements for the related contracts.
UBS Maintains Buy Rating but Financing Capability Will Determine Valuation Recovery Pace
Despite lowering its price target, UBS maintained its "Buy" rating on CoreWeave. Based on a share price of $54.75, the $105 price target implies approximately 91.8% potential upside. However, the firm believes that the core factor currently affecting CoreWeave's stock price has shifted from computing power demand growth to financing risk. Although the company has a massive long-term order backlog, continuously building data centers requires substantial capital investment, and debt financing costs and the capital market's assessment of its credit condition will directly affect its future expansion capacity. Therefore, CoreWeave's upcoming third-quarter earnings report not only needs to demonstrate revenue and order growth, but also needs to explain new financing arrangements, capital expenditure requirements, and cash flow improvement paths to investors. For the market, whether the company can fulfill its $129 billion in contracts at an affordable financing cost has become a more closely watched issue than the scale of new orders.
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