CoreWeave's Stock Is Plunging. Should You Buy the Dip?
Key Points
Shares of CoreWeave fell after the company announced lighter guidance and higher capital expenditures.
CoreWeave's backlog has grown to nearly $100 billion.
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It hasn't been an easy start to May for CoreWeave (NASDAQ: CRWV). The artificial intelligence (AI) infrastructure provider tumbled more than 10% this month as of May 12, raising the question of whether this sell-off is justified or if investors should buy the dip.
It's important to first understand what rattled the stock. Ultimately, CoreWeave posted solid numbers for this quarter, but its second-quarter guidance fell short of Wall Street's consensus expectations. This, combined with the fact that operating costs more than doubled to $2.2 billion from the same quarter last year, has investors wondering whether the high spending will pay off as growth slows.
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CoreWeave anticipates higher capital expenditures over the next quarter as well, which is again shaking investor confidence. CoreWeave's aggressive spending and debt load are putting pressure on the balance sheet and margins. Losses this quarter were higher than at this same time last year, according to the company's earnings report.
Image source: The Motley Fool.
The good news is that CoreWeave's backlog is approaching $100 billion. It also boasts strong partnerships with mega players such as Meta Platforms, Nvidia, and Anthropic.
There are two ways to approach CoreWeave right now. If you're an investor with high risk tolerance, buying this dip will still require patience, but with the strong backlog and high-profile partnerships, CoreWeave does have a path to profitability.
However, for those wary of the short-term increase in losses and heavy debt, staying on the sidelines for now might be the smarter move. You'll get more sleep this way.
Should you buy stock in CoreWeave right now?
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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Nvidia. The Motley Fool has a disclosure policy.
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