HSBC has a reduce rating on CoreWeave and a $39 price target, which implies 36% downside from Monday's close. The bank points to the company's debt load and slowing AI-linked revenue. Its call runs against most analysts covering the stock.
HSBC expects CoreWeave shares to keep falling as debt mounts and worries grow about slowing artificial intelligence-linked revenue. The bank has a reduce rating on the cloud infrastructure stock. Its $39 price target implies 36% downside from Monday's close.
Returns below the cost of borrowing
Analyst Abhishek Shukla said in a Monday note to clients that CoreWeave earns an average 2026-30e return on invested capital of 8.9%, below its cost of borrowing. He added that the more the company invests with this return profile, the more the value destruction.
Shukla also wrote that debt market woes and moderating large language model revenues are exacerbating "structural concerns for neoclouds", according to HSBC's note. The stock's decline could steepen, particularly as neocloud companies continue to see weakness in spending from large language models, per HSBC.
Debt and credit signals
The neocloud name dropped more than 25% last week as investors grew concerned about its outsized borrowing for AI initiatives. CoreWeave has assumed more than $51 billion in debt to pay for its infrastructure build-out.
Spreads on CoreWeave credit default swaps, an insurance against the company defaulting on its debt, reached distress levels last week. Shares are down more than 21% over the past five days.
A call against consensus
HSBC's view goes against consensus on the Street. Of the 45 analysts covering CoreWeave, 32 have a buy or strong buy rating, LSEG data shows.
Source: CNBC
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