CoreWeave Stock Skyrockets 137% in a Month: Hold or Fold?
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The company has outpaced its peers like Nebius Group N.V. NBIS, Microsoft MSFT and Amazon AMZN. Nebius, Microsoft and Amazon shares have gained 43.4%, 5.2% and 0.9%, respectively, in the same time frame.
After the massive surge, investors are likely to contemplate what to do next, whether it is time to take profits or continue holding CRWV.
The increasing demand for AI cloud platforms, including integrated software and infrastructure, bodes well for CRWV. The company highlighted that AI is forecasted to have a global economic impact of $20 trillion by 2030, while the total addressable market is anticipated to increase to $400 billion by 2028. In the last reported quarter, revenues of $981.6 million beat the Zacks Consensus Estimate by 15.2% and jumped 420% year over year.
Management inked a strategic partnership with OpenAI for about $11.9 billion, while adding several new enterprise customers and a hyperscaler client. It has signed expansion agreements with many customers, including a $4 billion expansion with a big AI-enterprise customer. CRWV added that the $4 billion expansion agreement signed with a big AI client will be reflected in revenue backlog beginning in the current quarter.
CoreWeave now boasts a growing data center network with 33 data centers across the United States and Europe, supported by 420 megawatts of active power. Moreover, the buyout of the Weights and Biases acquisition has added 1,400 AI labs and enterprises as clients for CoreWeave.
CRWV also works with NVIDIA Corporation to implement the latter's GPU technologies at scale. CoreWeave was one of the first cloud providers to deliver NVIDIA H100, H200, and GH200 clusters into production for AI workloads. The company's cloud services are also optimized for NVIDIA GB200 NVL72 rack-scale systems.
Driven by healthy momentum, CRWV expects full-year 2025 revenues to be between $4.9 billion and $5.1 billion. Adjusted operating income is forecasted to be between $800 million and $830 million. For the second quarter, CRWV projects revenues to be between $1.06 billion and $1.1 billion. Adjusted operating income is forecasted to be between $140 million and $170 million.
CoreWeave faces tough competition in the AI cloud infrastructure space, which boasts behemoths like Amazon and Microsoft and other players like Nebius. Amazon Web Services and Microsoft's Azure cloud platform together dominate more than half of the cloud infrastructure services market.
CRWV expects capex to be between $20 billion and $23 billion for 2025 due to accelerated investment in the platform to meet customer demand. The company anticipates stock-based compensation to remain slightly higher in 2025 for the grants issued pertaining to the IPO. Higher capex can be a concern if revenues do not keep up the required pace to sustain such high capital intensity, especially in a macro environment where AI demand cycles could fluctuate due to competitive pricing and regulatory changes.
High interest expenses could weigh on profitability. In the first quarter, interest expense came in at $264 million, topping expectations. This was attributed to changes in vendor payment terms. The company now guides interest expense to remain elevated, at $260-$300 million in the current quarter. Higher interest expenses can exert pressure on the adjusted net income and potentially affect free cash flow generation.
CoreWeave's 77% of total revenues in 2024 came from the top two customers. This intense customer concentration is a major risk, especially if the client migrates, the revenue impact could be material. Apart from this evolving trade policy, macro uncertainty and volatility remain additional headwinds.
CRWV currently carries a Zacks Rank #3 (Hold), which indicates that existing investors can hold the stock as its growth prospects remain intact. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Staying invested in CRWV stock appears prudent for now due to its strong revenue growth prospects amid surging demand for AI-focused cloud infrastructure. Strategic partnerships with major players like OpenAI and NVIDIA bode well. The company's massive $259 billion revenue backlog and expanding data center footprint position it well for sustained growth.
While near-term headwinds such as elevated capital expenditures and customer concentration pose risks, CRWV's specialized AI-optimized platform provides a distinct competitive advantage. However, intensifying competition from tech giants remains a key concern.
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