HSBC sings the decline of CoreWeave (CRWV.US) will plummet by 76%: lack of differentiated competitive advantage Over-reliance on Microsoft Corporation and NVIDIA Corporation

HSBC downgraded the artificial intelligence cloud service provider CoreWeave (CRWV.US) to "reduce" rating, with a target price of only $32, which is 76% lower than the closing price on Thursday. The reason given by the bank is the relatively low return, lack of differentiation competitive advantage, and high dependence on Microsoft Corporation (MSFT.US) and NVIDIA Corporation (NVDA.US). HSBC analyst Abhishek Shukla stated in an investor report, "Just like general cloud service providers, driving more value-added services sales through the software stack may be the key to achieving higher returns. However, before this, CoreWeave needs to successfully transition to general cloud computing services and expand its customer base from Microsoft Corporation and OpenAI (which together accounted for over 72% of its revenue and most of the order backlog in the first quarter of 2025) to customers who rely more on its complete software stack." HSBC expects that starting from 2030, around 35% of CoreWeave's revenue will be used for maintenance capital expenditures due to GPU aging, which will weaken the company's free cash flow. The analyst pointed out, "Our earnings per share expectations for CoreWeave from 2027 to 2030 are about 45% lower than market consensus." "We believe the market significantly overestimates the company's long-term non-GAAP EBITDA and operating profit margins. At the same time, the market also underestimates the implied level of interest rates on the company's debt." HSBC also pointed out that CoreWeave's excessive dependence on Microsoft Corporation as a customer and NVIDIA Corporation as a GPU supplier is a potential long-term weakness. The analyst stated, "As NVIDIA Corporation is the sole GPU supplier for CoreWeave, we believe that CoreWeave has almost no bargaining power." "We believe NVIDIA Corporation aims to support challengers of traditional hyperscale cloud service providers to enhance competition in the GPU leasing market." The analyst added, "We believe that CoreWeave lacks bargaining power in its relationship with Microsoft Corporation, which contributed over 70% of its revenue in the first quarter of 2025." "We speculate that Microsoft Corporation chose to lease GPUs from CoreWeave largely due to the GPU shortage in the market. As GPU supply improves, we expect Microsoft Corporation to directly purchase more GPUs rather than lease them from CoreWeave for resale to its customers." However, the analyst also noted that relying on a few customers also has a benefit, which is that CoreWeave's sales and marketing costs are relatively low.