HSBC sticks with Reduce on CoreWeave: neoclouds earn ~$12M per MW versus $17-18M for hyperscalers

What's the call? HSBC Global Investment Research reiterated its Reduce rating on CoreWeave on 19 October, with a $39 price target, 36.5% below the $61.39 share price of 16 October. Its headline: “Debt market woes along with moderating LLM revenues are exacerbating structural concerns for neoclouds.” HSBC kept its 2028-30 non-GAAP EPS estimates, which sit 50-70% below consensus.

The structural argument: HSBC expects CoreWeave to earn about $12M of revenue per MW a year in 2027, against $17-18M for hyperscalers. Hyperscalers rent capacity on more lucrative short-term contracts, sell more differentiated general-purpose cloud services and serve many smaller customers that take their full technology stack. Neoclouds earn most of their revenue from a few large customers buying commoditised bare-metal GPU capacity. HSBC sees CoreWeave's long-term non-GAAP operating margin at 15-16%, versus management guidance of about 25%.

Why the pivot may stall: From May to September 2026 neoclouds signed several lucrative short-term contracts. HSBC cites CoreWeave deals of three to six months in September at about $40M per MW a year, and SpaceX deals with Anthropic and Google that could earn SpaceX $22-50M per MW. But the bank notes a slight slowdown in growth at LLM providers, which could soften demand for spot compute, while rising yields and debt-market concerns could stop neoclouds from building the speculative capacity those contracts need.

Context: The note follows a rough stretch for the sector. CoreWeave shares fell 15% on 14 October and the yield on its 2032 bond climbed to 15.77%, CNBC reported, while Gartner predicted that more than 80% of neocloud providers will cease independent operations by 2030. HSBC has rated CoreWeave Reduce since it initiated coverage in July 2025 with a $32 target.

Sources: HSBC report page shared by Brian Sozzi on X, CNBC, CNBC (July 2025).