CoreWeave stock surge brings post-IPO rally to 340% after unusually positive analyst downgrade
CoreWeave (CRWV) stock jumped over 8% on Tuesday, bringing the AI cloud company's post-IPO rally to a whopping 340% after Bank of America analyst Brad Sills downgraded the stock but set his price target on shares to a new Street high.
On Monday, Sills downgraded CoreWeave stock to Neutral from his previous Buy rating, citing its high valuation. He noted that CoreWeave is trading at 27 times its 2027 earnings and highlighted its significant debt.
"Historically, CoreWeave has funded 85% of capex with debt," Sills wrote in a note to clients on Monday. CoreWeave is set to spend up to $23 billion in 2025, a figure that surprised Wall Street analysts and sent the stock down in May immediately following its first-ever earnings report as a public company.
Despite the downgrade, Sills raised his price outlook on the stock to $185 from $76, the highest among Wall Street analysts tracked by Bloomberg.
Sills cited capital expenditures on AI, which he said are "still very healthy" while arguing that the "growth rate is peaking."
"[W]e see solid sustained demand in CoreWeave's AI infrastructure market," Sills wrote. He said AI capital expenditures are set to grow 4% in 2027 to $206 billion, but that growth is much less than the 65% jump in AI capex in 2025.
"The top-line momentum is strong, though access to debt is critical to support the business," he wrote. Sills cited CoreWeave's expanded deal with OpenAI (OPAI.PVT). CoreWeave in May secured a $4 billion deal with the ChatGPT maker in addition to its previously reported $11.9 billion commitment from the AI startup.
CoreWeave is one of the largest holders of Nvidia's (NVDA) graphics processing units and rents its data-center capacity to Big Tech firms such as Microsoft (MSFT) and Meta (META), as their own stores of GPUs haven't been sufficient to power their AI ambitions. CoreWeave uses its debt, borrowed at high interest rates against its store of Nvidia GPUs as collateral, to buy more Nvidia chips. Nvidia is also a major investor in and customer of the AI cloud firm.
The company has added more than $64 billion to its market cap — which stood at $82.7 billion on Tuesday afternoon — since its March IPO.
In a note to clients on Monday, Jefferies analyst Brent Thill also gave a nod of approval to CoreWeave, listing the company among the investing firm's top AI stocks and reiterating his $180 price target on shares.
"CRWV is the fastest growing vendor in our AI coverage ... and we believe their infrastructure has more durability than most think," Thill wrote.
Other analysts remain skeptical.
"I believe that even in an optimistic scenario, all the cash flow from their [CoreWeave's] contract[s] goes to pay down debt, and none of it reaches the shareholders," DA Davidson analyst Gil Luria told Yahoo Finance in an interview Tuesday. Luria reiterated his Underperform rating on CoreWeave stock and $36 price target in a note to clients last week.
Luria noted that there is somewhat of a "concern" around CoreWeave's massive deal with OpenAI because "while it's [OpenAI is] an incredibly impressive company ... it's also losing a tremendous amount of money."
"So OpenAI will have to do a lot more capital raising in order to afford what it's committed to CoreWeave," he added.
Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
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