Soaring Stock Prices of CoreWeave Today Explained
CoreWeave's shares saw a significant boost on Thursday, rising 12.4% by 2:31 p.m. ET. This surge comes after Citi analyst Tyler Radke upgraded his rating for the company's stock to "buy".
Despite the positive outlook, Radke has expressed doubts about CoreWeave's long-term viability, perceiving its current advantage over big tech as "too shaky". He has set a new price target of $160 for the company's stock.
The upgrade was based on Microsoft's earnings showing growing demand for what CoreWeave supplies. Microsoft, CoreWeave's biggest customer, is planning to spend $30 billion in Q3, 60% more than analysts expected.
CoreWeave's Aggressive Expansion and Financial Challenges
CoreWeave has aggressively expanded its AI infrastructure, leading to soaring capital expenditures—over $21 billion invested recently—and growing operating expenses. Despite a 420% revenue growth to nearly $982 million in Q1 2025, the company remains unprofitable and highly leveraged, holding $8.7 billion in debt with interest expenses around $260-$300 million quarterly.
However, CoreWeave's financial outlook shows signs of strategic management. The acquisition of Core Scientific aims to eliminate over $10 billion of future lease overhead by replacing leases with owned assets, forecasted to save $500 million annually by the end of 2027 while maintaining leverage neutrality.
Potential Reduction in Demand from Big Tech Companies
There is a risk that over time, big tech companies may no longer need CoreWeave's services. Big tech firms typically prefer internal infrastructure where feasible, which could limit long-term external demand growth, implying some strategic risk for CoreWeave if such companies reduce external cloud usage over time.
Despite this, CoreWeave's current backlog, partnerships with key AI labs (e.g., with IBM and OpenAI), and status as an early adopter of advanced NVIDIA GPUs suggest strong demand from enterprise clients.
In conclusion, CoreWeave is pursuing an aggressive growth and capital investment strategy that leads to high debt and operational costs, creating financial pressure. Yet, robust revenue growth, strategic cost-saving acquisitions, and strong customer demand base provide counterbalances. The long-term viability depends on continued successful financing, operational execution, and market demand stability amid evolving big tech infrastructure strategies.
[1] CoreWeave Q1 2025 Earnings Report [2] CoreWeave Press Release: Acquisition of Core Scientific [3] CoreWeave Q1 2025 Financial Statements [4] Fitch Ratings Report on CoreWeave
- The financial challenges for CoreWeave are evident as they face high capital expenditures, growing operating expenses, and large amounts of debt, with over $8.7 billion currently held.
- To mitigate future lease obligations, CoreWeave has recently made a strategic move by acquiring Core Scientific, aiming to save $500 million annually by the end of 2027 while maintaining a neutral leverage position.
- Radke's price target of $160 for CoreWeave's stock might be influenced by potential long-term strategic risks, such as a possible reduction in demand from big tech companies if they increasingly rely on internal infrastructure instead of external cloud services.
