Just experienced a sudden drop of over 22%! AI bearish news hits unexpectedly, causing a collective plunge in U.S. tech stocks!

“AI Horror Stories” Are Still Unfolding.

Due to growing concerns over the AI bubble and the unexpected surge in U.S. inflation data, the three major U.S. stock indices all declined sharply overnight. The Dow fell over 520 points, the Nasdaq dropped nearly 1.5% intraday, and most large tech stocks declined. Nvidia plunged over 4%, erasing approximately $446.4 billion (about 3.1 trillion RMB) in market value over the past two trading days. Additionally, the U.S. financial sector experienced a collective sell-off, with the KBW Bank Index dropping nearly 5%, as fears of “AI taking jobs” spread to financial stability.

Meanwhile, CoreWeave, a cloud AI computing power leasing giant dubbed “Nvidia’s godson,” also saw its stock plummet, falling over 22% intraday. According to its latest financial report, the company’s losses in Q4 of last year unexpectedly widened, and its earnings guidance fell short of market expectations. Its substantial capital expenditures further fueled market concerns.

Amid ongoing sell-offs in U.S. tech stocks, Andrew Garthwaite, head of global equity strategy at UBS, stated in a recent report that he has downgraded U.S. stocks to “benchmark” status within the global equity portfolio. He believes the factors that have driven U.S. stocks to outperform the global market for years are gradually diminishing, citing increased risks of a weaker dollar, overvaluation of U.S. equities, and rising uncertainties from Washington’s policy turbulence.

Financial Stocks Plunge Collectively

On the evening of February 27, Beijing time, after the U.S. stock market opened, the three major indices all declined. By the close, the Dow fell 1.05%, the Nasdaq dropped 0.92%, and the S&P 500 declined 0.43%.

Most large tech stocks declined, with Nvidia down over 4%, Apple down over 3%, Microsoft down over 2%, Meta and Tesla down over 1%, and Broadcom and TSMC ADRs closing slightly lower. Google and Amazon bucked the trend, rising over 1%.

The U.S. financial sector also experienced a broad decline. By the close, the KBW Bank Index fell 4.85%, its largest single-day drop since the tariff shock in April last year. Goldman Sachs dropped over 7%, J.P. Morgan fell over 9%, and Apollo Global Management declined over 8%. The financial services sector was not spared, with American Express down over 7%, leading the Dow components; LendingClub fell over 10%, and Affirm dropped over 6%.

Analysts pointed out that the recent collapse of UK mortgage lender MFS has reignited fears of “private credit cockroaches,” and concerns over “AI taking jobs” are spreading to financial stability.

Additionally, CoreWeave, dubbed “Nvidia’s godson,” saw its stock plunge over 22% intraday, closing down 18.51%.

On the news front, CoreWeave’s latest financial report showed that revenue in Q4 2025 exceeded analyst expectations, but net losses widened significantly, and its guidance for Q1 2026 also fell short.

Specifically, CoreWeave reported revenue of $1.57 billion in Q4 2025, up 110% year-over-year, slightly above the expected $1.55 billion. Its quarterly loss per share was 89 cents, higher than the 49 cents expected. Net loss expanded from $51 million in the same quarter last year to $452 million.

For guidance, CoreWeave expects revenue of $1.9–2.0 billion in Q1 2026, below the analyst forecast of $2.29 billion. For the full year 2026, it projects revenue of $12–13 billion, compared to analysts’ expectations of $12.09 billion.

Chief Financial Officer Nitin Agrawal explained that as the company expands rapidly, costs for data center leasing, electricity, and depreciation will be recognized before revenue.

What worries the market even more is that CoreWeave expects capital expenditures of $30–35 billion in 2026, far above the $10.31 billion in 2025. This huge capital outlay has raised concerns about the risk of significant short-term losses.

Agrawal disclosed that by the end of 2025, the company’s backlog revenue increased to $66.8 billion, more than four times the beginning of the year.

DA Davidson analyst Alexander Platt noted that CoreWeave is still working to address ongoing challenges related to backlog risks, debt obligations, and capital costs.

Reasons Behind Massive Capital Spending

As a cloud computing infrastructure company backed by Nvidia, CoreWeave’s core business model involves deploying Nvidia GPUs across dozens of data centers and leasing computing power to enterprise clients and AI model developers for training and running large language models.

For CoreWeave, the key to AI infrastructure leasing isn’t just signing contracts but also maintaining stable delivery of GPUs and electricity resources.

By the end of 2025, CoreWeave operated 43 active data centers with an active power capacity of 850 MW, while contractual capacity was 3.1 GW. Analysts previously estimated active capacity at around 827 MW.

The company plans to have over 1.7 GW of active power capacity by the end of 2026, exceeding the analysts’ average expectation of 1.59 GW, and by 2030, it aims to surpass its contractual capacity, exceeding 5 GW.

CEO Mike Intrator stated during the earnings call, “We see demand across the entire economy continuously growing, and the source is no longer limited to the initial large cloud service providers and foundational models. Now, this demand is exploding in the enterprise sector. We see more and more new entrants investing in the infrastructure they need.”

Intrator added, “We have decided to accelerate our build-out and scale further because our customers are eager to get more infrastructure faster. To increase capacity, they are willing to accept short-term profit losses.”

It’s worth noting that recent massive capital expenditures by AI giants have become a major risk factor troubling the U.S. stock market. Tech giants like Microsoft and Meta have expanded aggressively into AI, leading to significant stock declines, and CoreWeave has not been immune.

(Source: Securities Times)