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 Playing Out.

Due to growing concerns over the AI bubble and the unexpected surge in U.S. inflation data, the 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 also experienced a collective sell-off, with the KBW Bank Index dropping nearly 5%, as fears of “AI taking away jobs” spread to financial stability.

Meanwhile, CoreWeave, a cloud AI computing power leasing giant dubbed “Nvidia’s godson,” also saw its stock price 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 for the first quarter of this year 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” in the global equity portfolio. He believes that the factors driving U.S. stocks to outperform the global market for years are gradually diminishing, citing increased risks of a weaker dollar, overvaluation of U.S. stocks, and rising uncertainties from Washington’s policy turmoil.

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 slightly lower. Google and Amazon, however, rose over 1% against the trend.

The U.S. financial sector also saw a broad decline. By the close, the KBW Bank Index fell 4.85%, the largest single-day drop since the tariff shock in April last year. Goldman Sachs dropped over 7%, Jefferies fell over 9%, and Apollo Global Management declined over 8%. The financial services sector was not spared either, with American Express down over 7%, leading the Dow components; LendingClub plunged over 10%, and Affirm fell 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 stealing jobs have spread 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, a 110% year-over-year increase, slightly above the analyst forecast of $1.55 billion. Its quarterly loss per share was 89 cents, higher than the expected 49 cents. Net loss expanded from $51 million in the same period 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 the analyst expectation 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 to reach $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 also 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, and contractual capacity of 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 analyst average estimate of 1.59 GW, and by 2030, it aims to surpass its contractual capacity of over 5 GW.

CEO Mike Intrator said during the earnings call, “We see increasing demand across the entire economy, no longer limited to the initial large cloud service providers and foundational models. Now, this demand is exploding in the enterprise sector. More and more new players are entering and investing in the infrastructure they need.”

Intrator added, “We are intentionally accelerating our build-out and scaling up because our clients are eager to access more infrastructure faster. They are willing to accept short-term profit losses to increase capacity.”

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

Financial Chart by Dongcai: Key Insights

(Source: Securities Times)