CoreWeave's stock price skyrockets, will the long and short standoff trigger a short squeeze?

CoreWeave, which successfully transformed from an Ethereum Mining company to an AI cloud computing infrastructure provider, had its stock code CRWV listed on Nasdaq in March (, and the stock has soared 163% to date. Although many investors are concerned about its rising debt levels, cash burn rate, and whether its cloud computing services can remain stable in the long term, it has still been unable to withstand the buying frenzy from longer, leading to intense bullish and bearish confrontations.

NVIDIA's close collaborator CoreWeave works closely with OpenAI and Microsoft.

CoreWeave currently has 30 data centers and 250,000 GPUs, and recently reached a deal with OpenAI worth up to $4 billion to lease computing power to meet artificial intelligence demands.

At the same time, CoreWeave's first earnings report this month shows steady revenue growth, with clients like Microsoft committing to continue investing heavily in artificial intelligence computing.

Nvidia holds 7% of its shares, and through its close partnership with Nvidia, it is able to have priority access to Nvidia's latest chips, earning it the nickname "Nvidia's favorite child". Additionally, CoreWeave's collaborations with AI companies such as OpenAI and Microsoft give it a significant advantage in the AI field.

CRWV rise attracts the interest of short sellers

However, the bullish sentiment surrounding the company has attracted an increasing number of bears, who are actively shorting without any signs of easing. So far, the company's supporters have maintained an advantage, thanks to the relatively limited number of shares available for trading, which may exaggerate the volatility of the stock price.

But so far, this rise has only increased traders' interest in shorting the stock. According to data from S3 Partners LLC, the proportion of CoreWeave shares borrowed by short sellers rose from 18% at the end of April to 45% earlier this week.

The rise in stock prices may ultimately lead to sufficient losses for short sellers, forcing them to close their positions and repurchase the borrowed shares. This could result in a buying spiral, known as a "short squeeze" )short squeeze( market, further driving up stock prices. However, S3's predictive analysis general manager Ihor Dusaniwsky stated that he has not yet seen signs of this yielding.

At this price level, there are a large number of new short positions. Therefore, it is very likely that you will see short positions being squeezed out of the market and immediately replaced by new short positions.

High debt raises concerns, analysts believe the risks are too high.

For bears, the company's massive capital requirements, high borrowing costs, and uncertainty about the long-term demand for artificial intelligence services create a dangerous combination. In the first quarter, CoreWeave's loss per share widened to $1.49, up from $0.62 in the same period last year.

The company's capital expenditure target this year is between 20 billion and 23 billion dollars, which will be funded through debt issuance. According to data compiled by Bloomberg, as of March 31, the company's debt-to-total-assets ratio is 54%, higher than the average of 30% for the Nasdaq 100 index.

Among the analysts covering CoreWeave tracked by Bloomberg, over 65% gave it a hold or sell rating. Analysts believe that the current level of risk is simply too high relative to the business model, with too many unknowns.

This article discusses the skyrocketing stock price of CoreWeave, a subsidiary of Nvidia, and whether the long and short confrontation will trigger a short squeeze. Originally appeared in Chain News ABMedia.