NVIDIA-backed AI Cloud Compan Coreweave (CRWV) stock has soared more than 100% since its IPO in March, as investors’ hopes for an AI boom exceed the focus of what some analysts call risky business models.
In the same time frame, the S&P 500 achieved even less than 7%. CoreWeave is one of the largest holders of NVIDIA's graphics processing unit (GPU) and rents its data center capabilities to big tech companies such as Microsoft (MSFT) and Meta (Meta) as they scramble to ambitions for AI.
NVIDIA (NVDA) owns a 7% stake in Coreweave, according to a submission to the SEC on Thursday. In addition to supporting the company, NVIDIA also has the ability to sell chips to Coreweave and buy data centers.
CoreWeave reported its first-quarter earnings results this week as a public company, with revenue rising for the three months to March 31 and in a $4 billion deal with Chatgpt Maker Openai, the revenue outlook for the year far exceeded Wall Street expectations. However, the stock fell after the earnings call, which was delayed due to the highly anticipated appearance of capital expenditures.
Wall Street analysts remain optimistic about Coreweave stock after earnings. Jefferies analyst Brent Thill holds a buy rating for the stock, and his stock target has been raised to $80 from $51 on Thursday, citing "unlimited demand."
Macquarie analyst Paul Golding raises his price outlook from $56 to $65. Coreweave's prospects "stand the growing nature of AI demand and the agility Coreweave makes to it," he said in a note.
Meanwhile, "large contracts obtained from the most demanding Genai users can be a good confirmation of Coreweave's strong position," said Keith Weiss, an analyst at Morgan Stanley who rated the stock equally, who raised his target from $46 to $58.
Other analysts remain skeptical.
DA Davidson analyst Gil Luria lowered Coreweave to underperform on Thursday and took its $23 billion capital expenditure forecast for 2025, like it expects to have much less revenue (about $5 billion).
Luria told Yahoo Finance in an interview this week that Coreweave’s capital structure is “very risky” because the company uses debt financing, which is borrowing from its depreciation store NVIDIA NVIDIA HOPPER AI chips to buy more of the latest NVIDIA chips to keep the AI Data Data Data Center Market competitive. Luria said CoreWeave has a lot of debt – with about $12 billion in debt commitments, with high interest rates. Its interest expenses will only increase, jumping about 550% from last year to $264 million.
A Coreweave spokesperson told Yahoo Finance: “Coreweave’s capital expenditure and debt structure are strategically aligned with long-term, firm client contracts – clear evidence of strong demand signals it receives from its clients and provides strong revenue visibility and attractive unit economics for the company.”
CoreWeave also relies on only a few customers. In a document Thursday, it said 72% of its revenue came from Microsoft in the first quarter of 2025.
Hedgeye Risk Management analyze Felix Wang, who holds a short position on the stock and said he has taken a financial beating because of that bet, said "the catch here is if the hyperscalers do at some point decide to do their own thing — whether it's Microsoft building their own data centers, AWS (Amazon (AMZN) Web Services) building their own data centers — or the hyperscalers decide to use more ASIC products and not use GPUs per se from nvidia. ”
ASIC products are custom AI chips produced by companies such as Broadcom (AVGO), which are different from NVIDIA's more general graphics processing unit.
Wang said Coreweave's reliance on Openai is becoming increasingly disturbing. According to a regulatory application from Coreweave to the U.S. Securities and Exchange Commission, Openai's commitment to Coreweave in May was to place an additional $4 billion in Coreweave's promise to Coreweave in March in a $11.9 billion deal announced with the company.
Openai lost money and relied on continuing to raise funds, it didn't have to fund Coreweave's $16 billion commitment or $19 billion commitment for the so-called Stargate AI data center project, which is reportedly working to get out of the situation. Wang also expressed concern that SoftBank, the biggest supporter of Openai, has a lot of debt.
Luria said Coreweave can only succeed if AI continues to soar at an “exponential” rate. This is a risk, as Big Tech is still figuring out how to monetize the technology and can eventually return the capabilities of AI data centers. And if Big Tech reduces this capability, companies may stop renting additional capacity from Coreweave outside of operating their own data centers.
Laura Bratton is a reporter for Yahoo Finance. Follow her on bluesky @laurabratton.bsky.social. Email her to laura.bratton@yahooinc.com.
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