CoreWeave Shares Surge 22.5% Amid Analyst Upgrades and Nvidia Support
Shares of artificial intelligence (AI) company CoreWeave (NASDAQ: CRWV) experienced a remarkable increase on Friday. The stock initially soared by 26.3% during the morning, eventually stabilizing with a 22.5% gain by 1:15 p.m. ET.
The sudden spike followed CoreWeave’s first-quarter earnings release on Wednesday night, which had led to a more measured response earlier in the week.
Market Dynamics and Analyst Insights
Today’s upsurge can be attributed to two main factors. Firstly, a pair of sell-side analysts raised their price targets for CoreWeave. JPMorgan Chase boosted its target from $43 to $66, while Needham & Co. increased its target from $55 to $75. Despite these upgrades, a more significant driver appears to be a recent SEC filing revealing chipmaker Nvidia (NASDAQ: NVDA) had raised its stake in CoreWeave shortly after the company’s March IPO.
Investors took this move as a signal of confidence, knowing that Nvidia is recognized as a leader in AI technology. The filing indicated that Nvidia increased its holdings by approximately 35%, growing from 17.9 million shares at the time of CoreWeave’s IPO to 24.2 million shares by month-end.
The Earnings Report and Future Projections
While analysts’ target adjustments were notable, the reaction to CoreWeave’s earnings report on Wednesday fell short of expectations. The company reported revenue above projections and raised its 2025 revenue forecast to $5 billion, exceeding initial expectations of $4.6 billion. However, it also increased its capital spending outlook to $21.5 billion, surpassing earlier forecasts of $18.3 billion, which muted the initial positive response.
Valuing CoreWeave: Challenges and Opportunities
Valuing CoreWeave is complex. The company needs to secure significant capital to develop its high-cost data centers before it can earn revenue from leasing its GPUs to outside AI and cloud clients. Furthermore, it faces customer concentration risk, with Microsoft accounting for 62% of its revenue last year. Although Microsoft is moving to decrease its reliance on CoreWeave, a promising new agreement with OpenAI—valued as high as $11.9 billion—could mitigate this issue.
Following midday trading, CoreWeave’s market capitalization surpassed $37 billion, which translates to a valuation more than seven times this year’s revenue projections. While this may seem excessive for a capital-intensive business still reporting net losses, Nvidia’s endorsement provides substantial backing. With the ongoing AI revolution, CoreWeave has the potential for significant growth, though it is not without considerable risks.
Investment Considerations for CoreWeave
Before deciding whether to invest in CoreWeave, it’s essential to evaluate the outlook critically. While the AI sector promises significant returns, the inherent risks require cautious assessment.
