CoreWeave’s Selloff Is ‘Buying Opportunity,’ Deutsche Bank Says

The bruising selloff in CoreWeave Inc. shares this week has wiped out more than $10 billion in market value in just four sessions due to the company’s deteriorating credit profile.

But this represents a “buying opportunity” for investors, according to Deutsche Bank.

Shares of the Livingston, New Jersey-based company’s fell as much as 9.5% on Thursday morning as a measure of its credit risk climbed to an all-time high and its high-yield bonds extended declines. On Wednesday, Coreweave bonds plunged to levels that typically indicate distress. The stock is down more than 22% this week.

“A confluence of factors appear to have led to a sharp selloff in CoreWeave’s public equity and debt over the past week.” analyst Brad Zelnick wrote in a note to clients Thursday. However, he added, “we struggle to find company specific factors that justify the recent move.”

The market is discounting CoreWeave’s “strong customer base, established record of execution, backlog conversion and leading infrastructure performance,” wrote Zelnick, who has a buy rating on the stock. While the company will need to raise more capital, it can happen at a steady pace and is supported by a robust customer backlog, he wrote.

The shares recovered some on Thursday after Nvidia Corp. Chief Executive Officer Jensen Huang said CoreWeave’s “cost of capital is actually decreasing.” Huang added that Nvidia doesn’t need to backstop the company because it’s “strength is improving every day.”

Read More: Nvidia CEO Huang Says CoreWeave Improving, No Backstop Needed

Separately, Gartner Inc. has warned that the AI infrastructure boom may be running ahead of the revenue needed to justify it, estimating that more than $3.5 trillion of spending could be at risk of impairment by 2030. The research firm predicts that cost pressures and limited differentiation will force more than 80% of neocloud providers to cease operating independently by 2030.

The risk as particularly acute for companies like CoreWeave and Nebius Group NV, whose business models are more directly tied to demand for computing capacity, Gartner said. Shares in Nebius were down 5.4% at midday Thursday, bringing their four-day decline to 20%.