Cathie Wood Is Doubling Down on This AI Stock During the Sell-Off

Cathie Wood, founder and CEO of Ark Invest, is loading up on an AI stock that the market has been dumping in recent weeks, CoreWeave (NASDAQ: CRWV).

Ark's largest exchange-traded fund (ETF), the ARK Innovation ETF (NYSEMKT: ARKK), has added more than 100,000 shares of CoreWeave in recent weeks. On July 8, Wood bought $811,600 worth of shares. That followed a $2 million purchase on July 7. Wood also purchased $6.5 million worth of shares on June 29, according to Cathie's Ark.

ARKK now owns 1.6 million shares of CoreWeave, a roughly $146 million stake. It is the ETF's 17th-largest holding, making up 2.2% of the $6.5 billion portfolio.

Wood is going against the tide, as CoreWeave stock had been in a freefall. Since June 18, when CoreWeave was trading at $118 per share, the stock has plummeted 23% to around $90 per share. There are several reasons why the stock has dropped so sharply.

Image source: Getty Images.

Explosive growth

CoreWeave is a cloud computing specialist that builds AI data centers. It rents out computing power to other companies to use to handle their cloud computing needs.

CoreWeave has enjoyed explosive growth, with revenue up 114% year over year in the first quarter to $2.1 billion. Demand remains high, as CoreWeave reached nearly $100 billion in backlog in Q1.

Its outlook calls for revenue of $2.45 billion to $2.6 billion and adjusted operating income of $30 million to $90 million in the second quarter. For the full year, revenue is targeted at $12 billion to $13 billion, with adjusted operating income at $900 million to $1.1 billion.

While the growth is staggering, the concern is high expenses and debt. This is an asset-heavy business that requires massive infrastructure investments. Capital expenditures (capex) were $6.8 billion in Q1, and the company guided for between $7 billion and $9 billion in the second quarter. It also raised its full-year capex forecast to $31 billion to $35 billion on higher component pricing. Previously, the guidance called for $30 billion in capex.

CEO Michael Intrator said on the fourth-quarter 2025 earnings call that it was due to "the extraordinary amount of contracted demand in front of us."

Debt and other concerns

The company has accumulated a huge amount of debt -- about $35 billion, up from roughly $2 billion in 2023.

CoreWeave is also unprofitable, reporting a net loss of $740 million in the quarter, up from $315 million in Q1 2025.

Another recent concern is the news that Meta Platforms (NASDAQ: META), CoreWeave's largest customer, is looking to sell its excess computing power. While nothing is concrete at this point, it raises concerns that Meta's foray into cloud could essentially turn Meta into a competitor, not a partner. CoreWeave stock tanked 14% on the news.

Wood bought these CoreWeave shares after the news broke, so she's buying low and perhaps doesn't view this as a long-term threat. That gamble may work for her, but the average investor without her resources should view CoreWeave cautiously.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.