- CoreWeave stock has crashed and formed a head and shoulders pattern after Elice IPO flop reignated AI bubble fears
- CoreWeave stock resumed its downward trend in the premarket session.
- Elice, a South Korean company, dropped by 33% after its IPO.
- The crash has reignited last week’s AI bubble fears.
CoreWeave stock continued its strong sell-off today as jitters surrounding the artificial intelligence industry continued. CRWV plunged to $58 in the premarket session, its lowest level since May last year and 68% below its all-time high.
Elice Crash Reignites AI Bubble Fears
CoreWeave stock has been under pressure in the past few weeks. This crisis escalated last week when a Gartner report warned that neocloud companies will need to announce major impairments in 2030.
That report came at a time when CoreWeave’s bond yields were in a strong upward trend, with those maturing in 2032 yielding 15%.
After cooling on Monday, there are signs that investors are starting to dump AI stocks again. The ongoing crash happened after Elise, a South Korean data center company, plunged by over 30% on its debt. Before that, Firmus, an Australian company, pulled its IPO as investors pushed back against its valuation.
Now, there are signs that investors are pushing back against Nscale, a British company seeking a $30 billion valuation. Its investors are asking the management to target a $15 billion valuation.
According to Bloomberg, Nscale is now in talks with Anthropic for a big multibillion-dollar deal. It has already signed a $45 billion deal with the same company.
CoreWeave is facing some major challenges. The most notable one is its ballooning debt load, which jumped to nearly $30 billion. With its yields rising, it means that the company’s interest expenses will continue soaring.
The company’s depreciation has also continued to rise and is now a big part of its costs. Its depreciation and amortization costs rose to $1.3 billion in Q2, a substantial figure since its revenue stood at $2.5 billion.
Still, some analysts believe that investors are panicking for no reason. For example, Goldman Sachs noted that the company has confirmed orders worth over $104 billion, and the growth is continuing. Its revenue growth is also accelerating, with analysts expecting it to hit $26 billion next year from $5.13 billion last year.
CoreWeave Stock Price Technical Analysis
CRWV stock chart | Source: TradingView
Technical analysis suggests that CRWV stock has more downside to go in the near term. It has already dropped below the important support level of $66.8, its lowest level in November and December last year, and March this year. This support was the neckline of the head-and-shoulders pattern.
The stock has plunged below the support level of $60.51, invalidating the double-bottom pattern. It has remained below the 50-day moving average and the Supertrend indicator. Therefore, the stock will likely continue falling, potentially to the support of $50 and below.