CoreWeave (CRWV) shares fell in premarket trading on Tuesday after HSBC reiterated its Reduce rating. The bank maintained a $39 price target. That target implies potential downside of 36% from the previous close.
The analyst cited the company’s high valuation and significant debt burden, which CoreWeave has used to finance its AI infrastructure expansion. HSBC warned that rising borrowing costs could pressure growth and profitability, with bond yields nearing 15%. The bank also said a potential moderation in demand from large language model developers could weigh on results.
HSBC projects CoreWeave’s return on invested capital will be below its cost of borrowing, raising questions about its ability to generate returns comparable to those of larger cloud providers. Shares had already fallen more than 25% in the prior week amid these concerns.