Nvidia (NVDA) CEO Jensen Huang is unlikely to ignore the building pressure on CoreWeave’s (CRWV) stock price and bond values.
The simple reason is that he can’t look the other way, given how intertwined Nvidia is with the most well-known — and debated — neocloud.
First, in January of this year, Nvidia announced an expansion of its relationship with CoreWeave. The deal included Nvidia investing $2 billion in CoreWeave stock. CoreWeave committed to using Nvidia’s technology to build more than 5 gigawatts of AI factories by 2030.
Nvidia now holds 47.2 million shares of CoreWeave stock, or around 10% of the company.
Second, CoreWeave is a huge customer of Nvidia, as shown in the chart below from the team at Boring Business.
CoreWeave buys GPUs from Nvidia and then rents that compute out to other companies, including hyperscalers like Meta (META).
“0% chance $NVDA lets $CRWV falter,” tech analyst Daniel Newman said on X.
Yet, CoreWeave’s failure is what the market is chatting about.
CoreWeave stock plunged 6% in premarket trading on Thursday following a 15% rout on Wednesday.
“In our view, the company’s long-term business model remains economically challenged; we maintain our Underperform,” Bernstein analyst Madison Rezaei said in a note Thursday.
60.76 -5.02 (-7.63%)
As of 10:24:15 AM EDT. Market Open.
Two factors collided to spark Wednesday’s sell-off.
One, CoreWeave’s corporate bonds across maturities continued to be dumped amid fears of an AI slowdown and its implications for the company’s precarious balance sheet.
The rise in yields on CoreWeave’s bonds even spurred Elon Musk to post “Yikes” on X in response to a post by venture capitalist Chamath Palihapitiya.
Two, Gartner, in a new report, forecast that by 2030 “cost pressure and a lack of a differentiating business model will force over 80% of neocloud providers to cease independent operations.”
CoreWeave is a neocloud. The report essentially was akin to yelling “fire” in a crowded theater.
At some point soon, Nvidia’s Huang may have to step in and comment on Nvidia’s confidence in CoreWeave. He has a financial interest in doing so, not only from an Nvidia standpoint, but also from the viewpoint of the wider AI boom his company’s chips are fueling.
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the Sozzi Unleashed morning show and the Power Players with Brian Sozzi podcast, and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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