CoreWeave faces downside risk as HSBC flags debt and AI revenue concerns
Mounting leverage and signs of softer artificial intelligence-related demand are deepening pressure on CoreWeave shares. HSBC says the cloud infrastructure company could face further losses, with its price target implying 36% downside from Monday's close.
Highlights
- HSBC maintains a reduce rating on CoreWeave with a $39 price target, implying 36% downside after shares fell over 25% last week.
- CoreWeave's estimated 2026-2030 ROIC averages 8.9%, below its cost of borrowing, as it funds infrastructure expansion with over $51 billion in debt.
- Credit default swap spreads on CoreWeave hit distress levels last week amid debt strain and weakening large language model revenue, diverging from broader bullish analyst ratings.
HSBC outlines debt-driven valuation pressure
As reported by CNBC, citing HSBC, the bank maintains a reduce rating on CoreWeave and sets a $39 price target on the stock, pointing to 36% downside from Monday's close. The call comes after a sharp selloff in the neocloud name, with shares down more than 21% over the past five days and more than 25% last week alone.In a note to clients on Monday, analyst Abhishek Shukla says CoreWeave earns an average 2026 to 2030 estimated return on invested capital of 8.9%, below its cost of borrowing. He says that profile means additional investment destroys value rather than creating it, as the company continues to fund a large infrastructure build-out with debt.
CoreWeave has taken on more than $51 billion in debt to support that expansion. HSBC also points to stress in the company's credit profile, noting that spreads on CoreWeave credit default swaps, insurance against a default on its debt, reached distress levels last week.
Street consensus diverges from bearish view
HSBC says the stock's decline could deepen as neocloud companies continue to face weaker spending tied to large language models. Shukla writes that debt market strain and moderating large language model revenue are worsening broader structural concerns for the sector.The bearish stance contrasts with the wider market view. Of the 45 analysts covering CoreWeave, 32 rate the shares buy or strong buy, according to LSEG data.
In our earlier article on the U.S. AI data center boom’s mounting financing risks, we explained that surging capital costs, construction delays, and power constraints are starting to undermine the credibility of many planned projects. We also noted that investor sentiment has already weakened for infrastructure-focused names, with CoreWeave’s sell-off and other cost overruns highlighting how expensive funding and execution setbacks can pressure returns across the sector.
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