CoreWeave stock price forms dreadful patterns as key risks persist

CoreWeave stock price remains in a technical bear market after falling from a record high of $186 in June last year to the current $81.

This retreat may continue in the near term after forming the highly bearish head-and-shoulders pattern.

CoreWeave stock price technical analysis 

The daily timeframe chart shows that the CRWV stock price has crashed since last year. It has dropped from a high of $186 in June to the current $81.

The stock could be at risk of more downside this year. First, the stock has formed a descending triangle pattern, which is made up of a horizontal trendline and a descending trendline. 

The horizontal line connects the lowest levels in November and December last year and March this year.

Its descending trendline connects the highest swings in June and October last year and January this year.

CoreWeave has also formed a head-and-shoulders pattern, which is made up of a head, two shoulders, and a neckline. It sits slightly above the neckline at $68.90.

The stock has remained below the Supertrend indicator and the 50-day and 100-day Exponential Moving Averages (EMA).

Therefore, the stock will likely resume the downward trend in the near term.

This view will be confirmed if it drops below the key support level at $69.

A move below that level will point to more downside, potentially to the psychological level at $50.

The bearish outlook will become invalid if it moves above the descending trendline, which is the upper side of the descending triangle pattern.

CRWV stock chart | Source: TradingView 

CoreWeave business is doing well, but risks remain 

CoreWeave and other companies in the AI industry are doing well as demand for data continues rising. This growth is happening as demand for artificial intelligence (AI) related data surges.

Most companies, especially large players like Microsoft, Google, Amazon, Oracle, and Meta Platforms, have all pledged to spend over $600 billion in capital expenditure this year.

Some of these companies are using a hybrid model, which involves buying their own data centers and leasing space from neocloud companies like CoreWeave, IREN, TeraWulf, and Nebius.

The most recent financial results showed that the company's business was doing well, which explains why NVIDIA recently invested an additional $2 billion in the company earlier this year. 

CoreWeave’s revenue jumped to $1.57 billion in the first quarter, a big increase from $747 million in the same period last year.

Its 12-month revenue jumped to $5.13 billion from $1.9 billion a year earlier.

The revenue jumped after the company reached deals with Microsoft, OpenAI, Perplexity, and Meta Platforms.

Wall Street analysts believe that CoreWeave’s business will continue doing well.

The average estimate is that its revenue will grow by 100% this quarter to $1.97 billion, followed by a 122% increase in the second quarter to $2.7 billion.

Consequently, its annual revenue is expected to jump by 142% to $12.4 billion, followed by $23 billion next year.

CoreWeave’s challenge is that its business is capital-intensive as the cost of chips and memory devices soar.

It spent $14.9 billion in capital expenditure last year, and the management expects to spend between $30 billion and $35 billion this year. 

The other risk is that the company’s business is getting highly competitive, with most Bitcoin mining companies pivoting to the industry.

This includes companies like IREN, TeraWulf, and Riot Platforms.