CoreWeave stock prices dropped 11% during Wednesday after the Nvidia-backed AI infrastructure provider announced a larger-than-expected quarterly loss which raised doubts about its cost management abilities during a period of high demand.
Operating expenses reached $1.19 billion in the second quarter which demonstrated the significant pressure from rapid expansion. The analysts predicted that heavy capital requirements combined with expanding losses and high customer concentration would make it difficult for the company to achieve profitability. OpenAI’s expansion of ChatGPT compute capacity demonstrates CoreWeave’s heavy reliance on its main client base.
The company entered public markets in March with $8 billion in debt and plans to use $1 billion from its IPO funds to pay off its debt. The upcoming expiration of the lockup period on Thursday will create market volatility because insiders will start selling their shares.
CoreWeave operates 33 AI data centers across the United States and Europe to offer Nvidia GPU access for training and operating extensive AI models. The stock price decline according to Deutsche Bank analysts stemmed mainly from the lockup expiration rather than fundamental issues although revenue exceeded expectations.
The business of maintaining AI demand requires significant expenses according to Susannah Streeter of Hargreaves Lansdown. The stock price has increased by almost three times since the IPO launch while investors continue to support the company despite its unprofitable status.
