Shares of CoreWeave (CRWV +7.47%) are falling today, down 10.8% as of 1:06 p.m. ET. The drop comes as the S&P 500 and Nasdaq Composite have lost 1.3% and 1.5%, respectively.
The AI cloud computing company is seeing its stock slide as an acquisition deal critical to its continued growth appears to be on shaky ground.
NASDAQ: CRWV
Key Data Points
CoreWeave's Core Scientific deal looks in danger
Earlier this summer, as CoreWeave stock was peaking amid insatiable demand for AI data center capacity, the company struck a deal with Core Scientific to acquire the data center infrastructure company. The acquisition would greatly expand CoreWeave's capacity and help it continue to scale rapidly.
The deal, however, was an all-stock deal -- shareholders of Core Scientific would not receive cash, but CoreWeave shares worth $9 billion. The stock has fallen nearly 50% from the time the deal was made, meaning the notional value of the contract is now worth about half of what it was. Some prominent shareholders of Core Scientific have already publicly stated that they will oppose the deal unless the terms are renegotiated.
The threat that this deal might fall through or that CoreWeave might be forced to pay significantly more than shareholders expected has spooked investors.
CoreWeave looks mighty risky
This is undoubtedly a popular stock and one of the most visible companies at the forefront of data center building for AI, but AI cloud computing infrastructure is enormously expensive, and the company is relying on huge amounts of expensive financing to continue to try to meet its computational obligations. Regardless of the outcome of the Core Scientific deal, I would stay away from this stock.
