CoreWeave, a major GPU cloud platform, revises annual revenue guidance downward due to datacenter deployment delays.

CoreWeave's shares tumbled 10% on Tuesday after the Nvidia-backed company scaled back its annual revenue forecast due to data center hiccups despite strong demand for its artificial intelligence services. The company's margins are pressured by soaring infrastructure expenses, rising AI chip prices, and intensifying competition for computing power, weighing on profitability. The stock was set to lose around $5 billion from its market value, with at least six brokerages cutting their price targets following the results.

CoreWeave said it faced delays with a key data center partner, but the impacted customer had agreed to extend the contract, keeping the deal's total value intact. The company did not name the client. Barclays analysts said the quarter "revealed something that investors have feared for a while - operational risk," adding that "This is the first time for the young AI infrastructure industry that this has come up and will likely remind investors that these large scale AI data centers are not easy engineering projects."

Once a major Ethereum miner, CoreWeave has pivoted to capitalize on the AI boom by leasing Nvidia GPUs and securing deals with tech majors such as Meta and ChatGPT-maker OpenAI. The stock has climbed about 164% since its March IPO. The company reported third-quarter revenue of $1.36 billion, topping analysts' average estimate of $1.29 billion. However, the company's adjusted operating income margin slipped to 16% in the third quarter from 21% a year earlier. According to analysts at MoffettNathanson, "This seems like an incrementally worse setup for the day in the future when demand isn't off the charts."