CoreWeave (CRWV) is down nearly 20% at the time of writing even after reporting market-beating revenue for its second quarter and offering upbeat guidance for the future. 

The AI infrastructure company saw its revenue more than triple to $1.2 billion in Q2, but investors seem to be fixating on the looming expiration of its lockup period on Thursday, Aug. 14. 

CoreWeave stock has been on an absolute tear since its debut in late March. Even after today’s dip, it’s up roughly 200% versus its initial public offering (IPO) price of just $40. 

Why the Lockup Expiration Is Negative for CoreWeave Stock

Investors are concerned that CRWV shares could sink rather significantly once the lockup period expires on Aug. 14 after market close. 

Why? Because the lockup period essentially refers to a set timeframe (often 90 to 180 days) during which insiders and early investors are restricted from selling a company’s stock. 

Now that it’s expiring for CoreWeave, insiders may consider trimming their stake in the AI infrastructure firm, especially since its share price has nearly quadrupled since late April. 

In short, if insiders and early investors do indeed choose to take profit after the lockup expires, the added supply could exert pressure on CoreWeave stock over the next few weeks. 

HSBC Warns of a Massive Crash in CRWV Shares

HSBC analysts recommend selling the post-earnings rip in CoreWeave shares because the artificial intelligence infrastructure company lacks revenue diversification. 

In its research note, the investment firm said lower utilization of data center assets could materially contract CRWV margins to 60.4% in the second half of this year. 

Then of course, there’s the valuation overhang. The AI stock is currently trading at a price-sales (P/S) ratio of about 26x, overly stretched given the Nasdaq-listed firm is yet to turn a profit. 

HSBC maintained its $32 price target on CRWV shares today indicating potential downside of nearly 75% from here.  

Wall Street Rates CoreWeave at ‘Hold’ Only

Investors should note that other Wall Street firms are not particularly bullish on CoreWeave stock either. 

The consensus rating on CRWV stock currently sits at “Hold” only with the mean target of roughly $100 suggesting potential downside of another 17% from current levels.