CoreWeave(NASDAQ:CRWV) was one of the early success stories of the artificial intelligence (AI) boom. The company offers its customers something much needed these days: capacity for AI workloads, which has led to increased revenue. The stock also turned heads as, after its IPO in March, it soared more than 300% in about three months.
The company got an additional nod from investors thanks to the trust of a key partner: the AI chip giant, Nvidia. The tech powerhouse works closely with CoreWeave, giving it early access to the latest chips, and Nvidia has even invested in CoreWeave, holding a 7% stake.
But of late, CoreWeave has faced some headwinds. The company expected delays at a third-party data center to weigh on its fourth-quarter sales. Investors are concerned about the growing debt levels that CoreWeave is relying on to expand its capacity. Ultimately, all of this hurt the stock, sending it down more than 40% since November 1st.
And just this week, CoreWeave chief Michael Intrator made a move that could get investors’ attention. Is this a cause for concern? Let’s find out.
Image source: Getty Images.
First, let’s take a closer look at CoreWeave’s story so far. The company is involved in the GPU-as-a-Service (GPUaaS) market, meaning it offers its customers access to its fleet of graphics processing units (GPU) or the best AI chips, depending on their needs. This service helps businesses save time and money because they don’t need to purchase their own GPUs or set up their own data centers. CoreWeave has already done the work, and unlike large cloud companies that offer a wide range of services, CoreWeave focuses specifically on AI workloads.
CoreWeave’s strong relationship with Nvidia also helped that company become the first to make Nvidia’s latest platforms, such as Blackwell and Blackwell Ultra, widely available.
All this led to a surge income — in the most recent quarter, revenue grew more than 130%.
Still, as mentioned, investors are concerned about various headwinds, from the recent data center delay to CoreWeave’s growing debt.
These factors have interrupted the stock’s momentum in recent weeks. Now consider the latest move from CoreWeave CEO Michael Intrator. In a Form 4 filed with the Securities and Exchange Commission, Intrator said it sold approximately $4.7 million in CoreWeave stock on Jan. 6.
When investors see company insiders like Intrator selling shares, they may wonder if it suggests a loss of confidence in the company’s future. After all, if these executives are confident, wouldn’t they buy the stock?
Before going down this path of concern, it is important to consider the context of Intrator’s move. The sale was part of the CEO’s 10b5-1 plan, which he adopted in May of last year. This framework allows insiders to arrange the purchase or sale of their shares without violating insider trading laws. These transactions are set up well in advance and, because they are planned, insiders should not have access to material non-public information. Intrator’s latest move was therefore a routine sale and not a reaction to any particular event or news.
Now the next question is: should you still be concerned that Intrator is considering selling rather than buying the stock? Not necessarily. Business leaders, just like the rest of us, at some point need to secure their investment gains to allocate cash to other areas or use it for everyday things – from buying a house to paying a child’s college tuition, for example. So it’s not alarming to see a CEO or other business executives planning sales for a certain amount of stock.
All of this means that CoreWeave shareholders shouldn’t worry about Intrator’s recent move; Instead, they should look to the company’s earnings reports and commentary on demand for clues about what might lie ahead.
Before buying CoreWeave stock, consider this:
THE Motley Fool Stock Advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now…and CoreWeave was not one of them. The 10 selected stocks could produce monster returns in the years to come.
Consider when Netflix made this list on December 17, 2004…if you had invested $1,000 at the time of our recommendation, you would have $482,326!* Or when Nvidia made this list on April 15, 2005…if you had invested $1,000 at the time of our recommendation, you would have $1,133,015!*
Now it’s worth noting Equity Advisor the total average return is 968% — an overwhelming market outperformance compared to the 197% for the S&P 500. Don’t miss the latest top 10, available with Equity Advisorand join an investor community built by individual investors for individual investors.
