Rapid Increase by 200% within a Month, Is the Purchase of CoreWeave Shares Still Opportune?
US-based cloud computing firm CoreWeave (CRWV), currently valued at $49 billion, has seen its shares soar by over 200% in the past month, propelled by better-than-expected earnings, a major client win with Google (GOOGL), and a surge in demand for AI infrastructure.
The company, backed by tech giants like Microsoft (MSFT), OpenAI, and Nvidia (NVDA), is positioning itself as a key player in next-generation AI cloud computing. However, a sharp increase in short interest indicates rising doubts regarding the stock's sustainability and profitability.
Riding the AI wave, CoreWeave specializes in AI-focused infrastructure, offering high-performance computing solutions specifically designed for AI model training and running. It operates 32 data centers with around 250,000 GPUs, partnering with chipmakers and software firms to deliver reliable, powerful AI infrastructure. Long-term customer contracts help fund growth, including GPU purchases and new data center leases.
During Q1 2025, CoreWeave reported a 420% revenue growth of $981 million, with its GPU compute services accounting for about 85% of the total revenue. Despite a net loss of $314.6 million, the company increased its EBITDA to $606.1 million, up from last year's 55%. Analysts predict CoreWeave's 2025 revenue to be approximately $5.03 billion, with a consensus adjusted EPS loss of $1.19.
In order to stay on track, CoreWeave must balance heavy spending with strong cash generation. Its planned $20 billion to $23 billion in 2025 capex will test its management skills in cost control, supply chain management, and interest expenses, currently running at 27% of Q1 revenue. High-visibility contracts like the $11.9 billion OpenAI deal will be crucial to keep momentum going.
Analysts remain bullish on CoreWeave, with a consensus "Moderate Buy" rating, but question whether the rapid price increase reflects overvaluation. The stock is currently trading at nearly twice its average price target, suggesting potential downside risk.
Despite the question marks, CoreWeave is undeniably gaining traction in the AI market. However, profitability is key to proving its long-term sustainability and justifying its premium valuation.
Investors were advised to consider both the potential long-term growth and the risks associated with CoreWeave's high valuation when deciding on investment strategies.
Investors may find opportunities in CoreWeave's focus on technology, particularly in the field of AI infrastructure, given its impressive growth in revenue and EBITDA. However, as technology investing involves risk and uncertainties, investors should also consider the rising doubts about the stock's sustainability and profitability, especially in light of the sharp increase in short interest.
