It wasn't a great week for tech stocks, but CoreWeave (NASDAQ: CRWV) severely underperformed the tech-heavy Nasdaq Composite index. Shares of the artificial intelligence (AI) infrastructure provider plunged 18% for the week, according to data provided by S&P Global Market Intelligence.
Volatility is common in stocks like CoreWeave, which are in heavy growth mode. Revenue is soaring, but the company is still losing money. But a report this week may have spooked investors, too.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
CoreWeave leases GPU computing power for the development and execution of AI models. It has been spending heavily to grow the volume of compute capacity it has available. That spending has included long-term supply agreements with chip manufacturers.
Demand is so high, though, that memory chip prices have gone through the roof. That's why investors have sent the stocks of names like Micron Technology and Sandisk soaring this year. The memory sector has historically been cyclical. As suppliers increase capacity while demand is high, a supply glut could follow, sharply dropping prices.
That's why CoreWeave may be looking to hedge against a future drop in memory chip prices, according to reports. The company's supply contracts could leave it exposed if competitors can pay lower prices after a downturn in the memory market.
The possibilities considered include put options — which are contracts granting the owner the right, though not the obligation, to sell an underlying asset at a specified price in the future — and possibly other derivative instruments.
Owning CoreWeave stock means accepting the volatility that inevitably comes with it. But investors typically don't like companies straying from their core competencies. That may help explain the outsize drop in CoreWeave stock this week.
Before you buy stock in CoreWeave, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and CoreWeave wasn't one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you'd have $371,842!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you'd have $1,244,783!*
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
