CoreWeave shares slumped 6% after hitting record high on Tuesday.

CoreWeave Inc.’s stock has been on a wild run, but a MoffettNathanson analyst thinks investors should avoid it.

Shares of CoreWeave are up about 210% from their $40 initial-public-offering price, but MoffettNathanson’s Nick Del Deo said the move doesn’t correspond with a dramatic improvement in the data-center company’s fundamentals. While there have been some positive developments, like an expanded deal with OpenAI, he noted that “trading dynamics” could better explain much of CoreWeave’s explosive stock move.

“CoreWeave’s thin float has surely played a role,” he noted, flagging that the stock’s average daily volume since its last earnings report has been similar to its float, though the float should increase once the company’s lockup expires this summer.

What does that all mean for investors? “Our bias is now skewed to the downside, as opposed to being quite balanced in our initiation, but attempting to trade this move appears exceptionally dangerous,” Del Deo said in a Monday note to clients, noting that the risks of moving to a sell call would “remain far higher than we feel comfortable accepting.”

He stuck with his neutral rating, though he upped his price target to $56 from $43, even as shares trade above $100.

“We don’t think investors should touch this stock either way,” he commented in his report.

Del Deo wondered if management will take advantage of the stock’s massive rally to conduct a convertible offering or use shares as currency for an acquisition. That’s “a distinct possibility, given the track record
of this management team and their savviness with respect to capital-raising activities,” he wrote.

In the meantime, Del Deo took a measured view of recent developments that seemed to be viewed by investors in an optimistic light. For example, Nvidia Corp. is a known investor in CoreWeave, and Wall Street reacted positively to the chip company’s financial filing from mid-May that showed its CoreWeave holdings as of the end of the March quarter. But Del Deo had been able to deduce Nvidia’s stake of 24.2 million shares before the filing came out, based on prior disclosures as well as Reuters reporting from March saying that Nvidiabought $250 million worth of shares in the IPO. Still, CoreWeave shares surged 22% in the session following the filing.

“So, what could have been interpreted as a concerning signal (Nvidia stepping in to help get the IPO over the finish line) was instead interpreted as a bullish one (Nvidia buying up shares),” Del Deo wrote.