By Emily Bary
A joint venture between Google and Blackstone isn't 'immediately problematic' for CoreWeave, but rather a sign that the market could get more crowded, according to a Bernstein analyst
CoreWeave's stock is dropping in Tuesday's premarket action.
A new joint venture between Google and Blackstone looks to be putting some pressure on neocloud stocks.
Google and Blackstone (BX) announced late Monday that they would team up to create a new cloud focused on tensor processing units, which are Google's custom chips. Blackstone plans to commit $5 billion at the outset to help bring 500 megawatts of cloud capacity online next year. Google, a unit of Alphabet (GOOG) (GOOGL), will supply the chips, software and various services.
The arrangement offers customers &#34;more choice and flexibility in how they access cloud TPUs,&#34; according to a Google blog post.
Shares of CoreWeave (CRWV) and Nebius Group (NBIS) were both down 3% in premarket trading Tuesday, with investors assessing the prospect of future threats to the business models of neoclouds, which rent out chip capacity.
Bernstein analyst Madison Rezaei noted that, at an anticipated 500 megawatts for 2027, &#34;this announcement is small&#34; relative to CoreWeave's expected scale for next year.
Don't miss: CoreWeave gets a $7 billion win from an unconventional customer. Financial firms want AI chips, too.
In that sense, the deal &#34;is not immediately problematic&#34; for CoreWeave. However, it &#34;represents the beginning of a more earnest hyperscale attack of the market,&#34; she added.
&#34;An increase in competition will pressure [CoreWeave's] pricing and margins on new deals and make it more difficult for [CoreWeave] to transition towards a more enterprise-heavy base,&#34; Rezaei wrote.
In her view, when it comes to areas like cost of capital, long-term margin potential and power access, &#34;a combined Blackstone + Google entity should win across all of those fronts.&#34; Rezaei has an underperform rating on CoreWeave's stock.
See also: How CoreWeave's 'situationship' with Big Tech could cause a stock drop
Representatives from CoreWeave and Nebius didn't immediately return a MarketWatch request for comment.
Meanwhile, Alphabet shares were up fractionally in Tuesday's premarket action, as are Blackstone shares. TPUs have become a powerful asset for Alphabet, and the company has teased that it plans to do more with its custom chips.
-Emily Bary
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05-19-26 0735ET

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CoreWeave's stock fell 3% in premarket trading following the announcement of a joint venture between Google and Blackstone to create a new cloud focused on tensor processing units. While Bernstein analyst Madison Rezaei noted that the deal isn't immediately problematic for CoreWeave, it signals increased competition that could pressure pricing and margins. Rezaei maintains an underperform rating on CoreWeave's stock, suggesting that the combined entity of Google and Blackstone may have advantages in cost of capital and long-term margin potential.

- A joint venture between Google and Blackstone aims to create a new cloud focused on tensor processing units, causing a dip in CoreWeave's stock.  
- The partnership will initially invest $5 billion to provide 500 megawatts of cloud capacity, increasing competition for neocloud companies like CoreWeave and potentially impacting their pricing and margins.  
- Bernstein analyst Madison Rezaei asserts that while the deal is not immediately threatening to CoreWeave, it suggests an intensifying competition in the market.

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CoreWeave's stock falls as new Google cloud venture may signal more competition ahead