CoreWeave stock sank this weak as investors adopted more cautious stances on some artificial intelligence (AI) stocks.
The company’s announcement of a new acquisition also spurred sell-offs.
Investors aren’t thrilled with the dilutive impact of CoreWeave’s stock-funded buyouts and financing moves.
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CoreWeave (NASDAQ: CRWV) stock got hit with a double-digit sell-off over the last week of trading. The company’s share price fell 13.5% from its level at the previous week’s market close.
CoreWeave saw a valuation pullback due to some hesitance about growth-dependent valuations for artificial intelligence (AI) companies. The stock also saw sell-offs in conjunction with news that the company is on track to acquire another player in the AI space. CoreWeave is still up roughly 123% from its price at market close on the day of its initial public offering earlier this year, but it’s also down 51.5% from its high.
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Investors have recently been taking a more cautious approach to valuations for some companies in the AI space, and CoreWeave stock has seen sell-offs in conjunction with the trend. Investors also apparently haven’t been thrilled with some of the company’s planned acquisition moves.
On Sept. 3, CoreWeave published a press release announcing that it had entered into definitive terms to acquire OpenPipe — a company that specializes in the training of AI agents. Specifics of the buyout were not included in the press release. Investors were also seemingly unimpressed when CoreWeave announced in July that it planned to acquire Core Scientific in a $9 billion all stock deal.
While many new AI companies will be launched over the next decade, the artificial intelligence market is also likely to see a very high amount of consolidation across the stretch. Buying companies that can complement its own technologies and product offerings and reduce operating costs through synergies could wind up being a great move for CoreWeave, but it’s also not surprising that the stock has seen big pullbacks in response to recent acquisition and financing news.
In addition to the all-stock buyout proposed with Core Scientific and the potential for new stock to be used to fund the OpenPipe buyout, CoreWeave has also announced other plans to sell large blocks of new stock in order to raise funds. This raises some questions about whether the company has thought that its stock was overvalued in a way that made new stock sales and stock-backed buyouts attractive, and the new share sales and related deals mean that existing shareholders are seeing the value of their stakes diluted.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why CoreWeave Stock Plummeted This Week was originally published by The Motley Fool