CoreWeave Stock Is Too ‘Expensive' According to Analysts. Should You Sell CRWV Now?
After spending just a few months on the public markets, CoreWeave (CRWV) is already making waves. The Nvidia (NVDA)-backed artificial intelligence (AI) infrastructure company made its public debut this March and has quickly emerged as one of the hottest tickets in the AI space. With investors actively scouting for the next breakout in the AI space, CoreWeave hasn't gone unnoticed.
In fact, the stock ranks among the most explosive IPOs this year, with its $40 offering price more than quadrupling since launch, driven by explosive momentum and a compelling growth story. Deep ties with AI superstar Nvidia, a client list stacked with tech heavyweights like Microsoft (MSFT), Meta Platforms (META), and International Business Machines (IBM), as well as a triple-digit revenue growth in its latest quarterly report, have all charmed investors.
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Even so, not everyone is staying on board for the ride. Bank of America, for instance, recently downgraded the stock, citing stretched valuations as a reason for caution. Following such a rapid surge, questions about how much future growth is already factored into the price have begun to surface. But is this valuation-driven downgrade truly enough to make investors walk away from this rising AI star?
CoreWeave (CRWV) is fueling the next era of AI with its high-performance cloud platform built for accelerated computing. Since 2017, it has rapidly expanded its network of cutting-edge data centers across the U.S. and Europe, serving top enterprises and leading AI labs worldwide. CoreWeave's business success is deeply rooted in Nvidia's technology, so much so that any discussion of the company naturally starts with the AI chip giant.
Apart from NVDA's stake in CRWV, CoreWeave's business is also deeply intertwined with Nvidia's powerful AI chips, offering on-demand access to a massive fleet of 250,000 NVDA GPUs across 30+ data centers. While customers can rent by the hour, most contracts lock in for two to five years, giving the company solid long-term revenue visibility despite its flexible model.
Now commanding a market cap of around $76.1 billion, this freshly listed AI player has delivered a jaw-dropping 114% gain in just the past month. That staggering rally leaves the broader S&P 500 Index's ($SPX) modest 0.4% gain in the dust, highlighting just how quickly CoreWeave has captured investor attention.
CoreWeave made a powerful entrance with its first-quarter earnings report, released on May 14. The company posted revenue of $981.6 million, blowing past expectations of $859.8 million and marking staggering 420% year-over-year growth. Even more impressive, adjusted EBITDA came in at $606.1 million, up 480% annually, with a healthy 62% margin to match.
Although the company reported a net loss of $1.49 per share, deeper than the $0.62 loss a year ago, this was largely due to a $177 million hit from stock-based compensation tied to its IPO.
CoreWeave's first quarter was packed with major contract wins. One of the biggest was a massive $11.9 billion contract with ChatGPT maker OpenAI, further cementing its role as a key player in the AI infrastructure race. The company also announced a strategic partnership with IBM to deliver compute capacity for its Granite AI models, another big-name endorsement of CoreWeave's capabilities.
Adding to the momentum, CoreWeave ended the quarter with a revenue backlog of $25.9 billion, reflecting strong demand visibility. Notably, the newly signed OpenAI deal isn't even included in that figure, suggesting even more upside ahead. Looking forward, CoreWeave has set bold expectations for 2025, guiding for revenue between $4.9 billion and $5.1 billion as demand for AI infrastructure continues to accelerate.
On June 16, Bank of America stepped in with a cautionary note on CoreWeave, downgrading the stock from 'Buy' to 'Neutral' on valuation concerns. Analyst Brad Sills raised the price target from $76 to $185, pointing to several positives such as a new hyperscaler customer, an expanded OpenAI deal, and a successful debt raise at more favorable rates. Still, he cautioned that 'with the stock trading at 25x CY27e EBIT, a premium to the peer group at 16x, we believe much of the upside is priced in.'
Sills also pointed to CoreWeave's projected $21 billion in negative free cash flow through 2027, fueled by aggressive capital spending expected to reach $46.1 billion. With about 85% of its capex funded through debt, he emphasized that continued access to 'reasonably priced debt' will be 'critical' going forward. Yet, despite the cautionary tone, investors shrugged off the downgrade, sending the stock up 7.7% on the same day.
Overall, Wall Street appears reasonably optimistic on CRWV stock, with a consensus 'Moderate Buy' rating. Of the 19 analysts offering recommendations, five are giving it a solid 'Strong Buy,' one suggests a 'Moderate Buy,' 12 advocate 'Hold,' and the remaining one gives a 'Strong Sell.'
As of writing, the stock is trading at a premium to its average analyst price target of $71.11, while Bank of America's newly issued price target of $185 suggests about 8% potential upside from current levels.
Despite valuation concerns flashing on analysts' radar, CoreWeave's fundamental growth story remains hard to ignore. The company is riding a massive wave of AI infrastructure demand, backed by long-term contracts, deep integration with Nvidia, and a robust customer base that includes the biggest names in tech. Its impressive revenue growth, expanding backlog, and strategic partnerships with strong AI players, such as OpenAI, signal that CoreWeave isn't just a passing AI trend. For investors with a long-term mindset, this may be a name worth holding onto.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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