Cathie Wood bought shares of CoreWeave (CRWV 1.17%), Spotify (SPOT +0.22%), and Alphabet (GOOG +4.96%) (GOOGL +4.79%) on Tuesday. The founder and CEO of Ark Invest added to the three existing positions in her aggressive growth ETFs.
All three stocks moved lower on the day, led by Spotify's 12% plunge. Is Wood being opportunistic? Let's take a closer look at all three companies.
Image source: Getty Images.
1. CoreWeave
CoreWeave stock fell 6% on Tuesday, following reports that OpenAI missed its internal revenue and user growth targets. There's a lot to unpack in that sentence, so let's do that.
CoreWeave is a hyperscaler that meets the booming demand for AI with high-performance, low-latency GPU computing infrastructure solutions. It entered into a five-year partnership with OpenAI 13 months ago, a couple of weeks before CoreWeave went public. CoreWeave stands to generate as much as $11.9 billion in revenue over that time, and OpenAI became an investor in CoreWeave.
NASDAQ: CRWV
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This week's news that OpenAI could face a potential shutdown is problematic. If OpenAI needs less AI-processing firepower, it could come at CoreWeave's expense. CoreWeave would later point out that it works with other AI platforms. When it announced a partnership with Anthropic earlier this month, it meant that CoreWeave was working with nine of the 10 largest AI platforms.
That doesn't mean CoreWeave won't feel a pinch if OpenAI slows its rollout. It's a substantial partner, and CoreWeave has been taking on debt to ramp up its growth. There's also this bigger problem: If OpenAI is falling short of growth expectations, could some of CoreWeave's other partners be feeling the same pain?
CoreWeave has delivered stunning growth in its first 13 months of trading. Revenue has more than doubled in each of its first four quarters since going public. The stock itself has also more than doubled. Analysts see revenue nearly doubling again when it reports first-quarter results next week.
NYSE: SPOT
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2. Spotify
The biggest sinker of the three stocks is Spotify. The shares plummeted more than 12% after the company followed up mixed first-quarter results with even more problematic guidance.
Revenue rose just 8% despite 12% growth in the number of monthly active users, to 761 million. At the heart of the monetization gap is that its premium subscriber count, which generates the lion's share of Spotify's revenue, is growing more slowly than its larger base of free, ad-supported users.
Adding insult to sonic injury, ad revenue declined both sequentially and year over year. But this isn't necessarily a deal-breaker. There is seasonality for advertising between the holiday quarter and the first three months of the following year.
The biggest concern coming out of this week's report is Spotify's guidance. It now expects to spend on marketing and the rollout of AI features, eating into the current quarter's operating profit. In short, none of this was exactly music to investors' ears.
NASDAQ: GOOGL
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3. Alphabet
Finally, we have Google's parent company with the kindest slide. The shares slipped less than 1%, as investors began positioning themselves ahead of this week's telltale financial update. Alphabet is one of four "Magnificent Seven" stocks reporting after Wednesday's market close.
Alphabet stock is currently one of just two companies with a market cap north of $4 trillion. Analysts are bracing for a slight decline in earnings per share. It's been that way since Alphabet mentioned that it's modeling $185 billion in capital expenditures this year. Revenue should be a bright spot, with Wall Street pros holding out for 19% top-line growth. If it gets there, it would be the search and online marketing giant's strongest top-line increase in more than four years.
The news is, understandably, less kind to the bottom line. After the company has seen its net margin accelerate for three consecutive years, Alphabet's investments will see those markups contract. As the most valuable company by market cap to report this week, Alphabet will set the tone with its critical financial update.
