Nvidia (NVDA) CEO Jensen Huang is unlikely to ignore the growing pressure on CoreWeave’s (CRWV) stock price and bond value.
The simple reason is that he can’t look away given how closely Nvidia is tied to the best-known – and most controversial – neocloud.
On the one hand, in January of this year, Nvidia announced the expansion of its relationship with CoreWeave. The deal called for Nvidia to invest $2 billion in CoreWeave stock. CoreWeave has committed to using Nvidia’s technology to build more than 5 gigawatts of AI factories by 2030.
Nvidia now owns 47.2 million CoreWeave shares, or about 10% of the company.
And second, CoreWeave is a big customer of Nvidia, as shown in the table below from the Boring Business team.
CoreWeave buys GPUs from Nvidia and then leases them to other companies, including hyperscalers like Meta (META).
“0% chance that $NVDA lets $CRWV weaken,” said technical analyst Daniel Newman on X.
However, it is the failure of CoreWeave that the market is talking about.
Shares of CoreWeave plunged 6% in pre-market trading Thursday after a 15% rout on Wednesday.
“From our perspective, the company’s long-term business model continues to face economic challenges; we continue to underperform,” Bernstein analyst Madison Rezaei said in a note Thursday.
65.78 -12.03 (-15.46%)
Closing: October 14 at 4:00:01 p.m. EDT
61.34 -4.44 (-6.75%)
Two factors collided to trigger Wednesday’s sell-off.
First, CoreWeave’s corporate bonds of all maturities continued to be abandoned due to fears of an AI slowdown and what that would mean for the company’s precarious balance sheet.
CoreWeave’s rising bond yields even prompted Elon Musk to post “Yikes” on X in response to a post from venture capitalist Chamath Palihapitiya.
Second, Gartner, in a new report, predicts that by 2030, “cost pressures and the lack of a differentiated business model will force more than 80% of neocloud providers to cease independent operations.”
CoreWeave is a neocloud. The report was basically like shouting fire in a crowded theater.
Soon, Huang may have to step in and comment on Nvidia’s confidence in CoreWeave. It has a financial interest in doing so not only from Nvidia’s perspective, but also from the perspective of the broader AIm boom that its chips are powering.
Brian Sozzi is the editor-in-chief of Yahoo Finance, host of the Sozzi unleashed morning show, the ‘Powerful actors with Brian Sozzi podcast and member of the Yahoo Finance editorial leadership team. Follow Sozzi on @BrianSozzi, InstagramAnd LinkedIn. Any advice on stories? Email brian.sozzi@yahoofinance.com.
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