Deutsche Bank kept its buy rating on CoreWeave after the stock plunged more than 15% on Wednesday. Investors are worried about the company's borrowing, while the bank says it struggles to find company-specific reasons for the drop.
Deutsche Bank told clients to buy the dip in CoreWeave after the cloud infrastructure stock's sharp selloff. The bank has a $150 price target on the shares, which implies 128% upside from Wednesday's close.
Shares fall as borrowing worries mount
CoreWeave shares plunged more than 15% on Wednesday as investors fretted over the company's outsized borrowing. Shares closed at $65.78 that session, according to Crypto Briefing.
The pressure is hitting the debt market too. Yields on CoreWeave's $1.25 billion in unsecured notes due 2032 climbed toward 15%, Crypto Briefing reported. Reuters said CoreWeave's credit default swaps topped 600 bps on Wednesday and rose above 1,000 basis points early Thursday as some investors looked to hedge exposure to the most leveraged AI players.
Shares traded more than 5% lower in premarket trading Thursday.
Deutsche Bank sees no company-specific cause
Analyst Brad Zelnick said in a note that a confluence of factors appeared to have driven the selloff in CoreWeave's equity and debt over the past week. He added that he struggles to find company-specific factors that justify the move.
Zelnick also argued the Nvidia-backed company could trade higher, even in a difficult market. According to CNBC, he cited its "close customer and technical relationships with industry leaders like NVIDIA, Dell, Meta", which he said should provide support and different financing options.
Broader AI selloff adds pressure
Reuters tied the move to a wider selloff. A hot September US inflation reading relit the fuse on this week's AI stock selloff, with Oracle also falling. Chip and tech stocks fell more broadly, and the S&P 500 dropped by more than 1%.
Deutsche Bank's call falls in line with consensus on the Street. Of the 45 analysts covering CoreWeave, 32 have a buy or strong buy, LSEG data shows.
Sources: CNBC, Reuters via Investing.com, Crypto Briefing
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