CoreWeave (CRWV +1.51%) zoomed from zero to hero on the stock market in just a couple of months.
The company, which rents out access to the popular Nvidia graphics processing units (GPUs) needed to power generative-AI products, went public at the end of March in an initial public offering (IPO) that was widely regarded as a disappointment. The company had to lower its IPO price due to lack of demand, and sold fewer shares than it had intended.
The debut priced at $40 and the stock closed below that mark as recently as April 22, but since surged due to positive updates from the company, as well as the overall market rebound made possible by cooling trade war tensions and generally solid economic data.
At the time of this writing, CoreWeave is up 270% from its IPO price, and it could move even higher as the company is delivering phenomenal growth.
In addition to improving sentiment, there were a number of news items that propelled CoreWeave shares higher. First, CoreWeave signed a $4 billion deal with OpenAI in May, showing continuing demand for CoreWeave's cloud-based platform. The deal signaled a diversification of its customer base away from Microsoft., which in 2024 accounted for 62% of CoreWeave's business.
Additionally, Nvidia revealed that it owned $900 million of CoreWeave stock at the end of the first quarter. That stake is now worth roughly $3 billion.
CoreWeave also posted strong first-quarter results with revenue up 420% to $981.6 million, though its generally accepted accounting principles (GAAP) net loss expanded from $129.2 million to $314.6 million.
CoreWeave's business model requires it to spend large sums up front on Nvidia chips, adding risk to the stock. The company's guidance called for revenue of $4.9 billion to $5.1 billion for the year, and capital expenditures of $20 billion to $23 billion.
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What's next for CoreWeave
Predicting where any stock will be in a year is difficult, but CoreWeave faces additional uncertainty due to its short history as a publicly traded company, the inherent risk in its business model, the surge in its valuation, and the volatility in the broader market and in the AI sector.
CoreWeave could easily top its revenue forecast for the year as its guidance, coming in its first report as a publicly traded company, is likely conservative. The forecast calls for roughly 160% in revenue growth.
The company is also likely to see more big deals such as the one it just announced with OpenAI as it needs those to fuel its growth, and demand for AI computing power is still soaring.
Investors appear willing to overlook CoreWeave's high debt burden in a rising interest rate environment, but the company would be rewarded if it refinanced its debt or lowered its risk in another way.
A year from now, CoreWeave seems on track to have trailing revenue of around $6 billion, though its bottom-line results are much harder to predict, especially as a business that's profitable on an earnings before interest, taxes, depreciation, and amortization (EBITDA), but not on a GAAP basis.
Ultimately, the company is beholden to broader demand for AI, though that seems to be safe for now.
NASDAQ: CRWV
Key Data Points
Is CoreWeave a buy?
CoreWeave is a high-risk stock, but it looks well positioned to be a leader in AI cloud infrastructure as its growth rate reflects soaring demand for its services.
The company is burning cash and pays a high interest on its debt, adding to the risk. However, considering the blowout growth rate and its leading position in AI cloud infrastructure, the upside potential the stock offers after its post-IPO rally is substantial. Following that logic, opening a small position wouldn't be a bad idea for risk-tolerant investors.
