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A company goes public in March, and by May, its stock has doubled. Investors are throwing money at it like confetti at a wedding. But some very smart people are also betting against it. What’s going on?
Meet CoreWeave – the company that’s become the poster child of the AI boom, and also its most controversial bet.
In March 2025, CoreWeave went public. Since then, the stock has soared over 209%. To put that in perspective, while the S&P 500 managed a modest 7% gain in the same period, CoreWeave’s investors were popping champagne bottles.
So, what’s the secret behind this astronomical rise?
Let’s get into it.
Remember 2023? ChatGPT had just blown everyone’s minds, and suddenly every company on the planet wanted to build their own AI. There was just one problem – they all needed the same thing: Nvidia’s GPUs (Graphics Processing Units), the powerful chips that make AI possible.
Think of GPUs as the engines of the AI world. Just like you can’t run a car without an engine, you can’t run sophisticated AI without these chips. And just like luxury car engines, they’re expensive, hard to make, and in short supply.
While tech giants like Microsoft, Google, and Meta scrambled to build their own data centers (think massive warehouses filled with thousands of these chips), a relatively unknown company called CoreWeave had quietly been hoarding these precious chips for years.
But here’s where it gets interesting – CoreWeave wasn’t planning to use these chips themselves. Instead, they had a different idea: “What if we become the Uber of AI computing?”
The Business Model: Uber for AI (But Way More Profitable)
CoreWeave’s business model is elegantly simple, yet complex. They rent out AI computing power to companies that need it, but with a twist that would make any CFO jealous.
Here’s how their money-making machine works:
Step 1 – Get Paid Upfront: A company like OpenAI approaches CoreWeave and says, “We need massive AI computing power for the next 5 years.” CoreWeave responds, “Sure, but pay us upfront.” And incredibly, companies do exactly that.
Step 2 – Use Customer Money to Build: CoreWeave takes that prepayment and uses it to buy the GPUs and build the infrastructure. It’s like getting paid to build your own business.
Step 3 – Deliver and Collect: Once the infrastructure is ready (usually takes 3-6 months), CoreWeave starts providing the AI computing service and collecting monthly payments for 4-5 years.
Step 4 – The Goldmine: Here’s the kicker – when the original contract expires, CoreWeave doesn’t throw away the infrastructure. They redeploy it for new customers or add it to their on-demand services.
Source: Company Presentation
It’s like building a toll road where someone else pays for the construction, they’ll use it for 5 years, and then you get to keep collecting tolls from everyone else forever.
The Defense: More Than Just GPU Rental
CoreWeave is not just leasing individual chips – they’re architecting them into high-reliability clusters of up to 10,000+ H100 GPUs working in perfect harmony.
This requires specialized software, networking, and cooling systems that create genuine technical barriers to entry. It’s like the difference between renting out individual hotel rooms versus managing an entire luxury resort.
Unlike general-purpose cloud providers like AWS, CoreWeave is vertically integrated for AI. They provide what they call “GPU-as-a-Service” with guaranteed latency, throughput, and availability – essentially functioning as an AI utility company.
The shift toward inference workloads (using trained AI models) versus training workloads is particularly promising for margins. Inference requires consistent, predictable compute rather than bursty training runs, leading to better utilization and recurring revenue.
The Numbers Game: When Success Looks Scary
Now let’s talk numbers, because that’s where this story gets both exciting and terrifying.
In Q1 2025, CoreWeave’s revenue jumped 420% year-over-year to $982 million. Read that again – four hundred and twenty percent growth. While the S&P 500 managed a modest 7% gain, CoreWeave’s stock soared over 200%.
Their EBITDA margin hit 62% – meaning for every $100 they earn, $62 is pure profit after covering basic operating costs. That’s phenomenal for any business, especially one that deals with expensive hardware.
But here’s where things get complicated. Despite making $606 million in adjusted EBITDA, they’re reporting a net loss of $315 million under standard accounting rules. Why? Because they’re paying massive interest on debt – $264 million in Q1 alone. That’s 27% of their total revenue just going to service debt.
To put this in perspective, imagine earning ₹1 lakh per month but paying ₹27,000 just in loan EMIs. You’re making good money, but you’re also walking a tightrope.
The Nvidia Connection: A Love Triangle Worth Billions
Here’s where the plot thickens. Nvidia – the company that makes the GPUs CoreWeave rents out – also owns 7% of CoreWeave itself. But it gets even more interesting:
- Nvidia sells chips to CoreWeave
- Nvidia owns 7% of CoreWeave
- Nvidia buys computing capacity back from CoreWeave
It’s like being the supplier, investor, and customer all rolled into one. This relationship gives CoreWeave priority access to the latest chips when there’s a global shortage – a massive competitive advantage that money alone can’t buy.
Think of it like having a direct line to the iPhone factory when everyone else is waiting in line at the Apple Store.
The $29 Billion Promise: Real Money or Paper Dream?
CoreWeave boasts a revenue backlog of $29 billion – essentially guaranteed future income from signed contracts. That sounds impressive until you realize not all backlogs are created equal.
Some of this money is in official GAAP “Remaining Performance Obligations” – legally binding contracts they must fulfill. But a significant chunk, including an $11.9 billion deal with OpenAI, sits in what they call “extended backlog” – committed but not yet officially recognized revenue.
Management believes they can convert 20-25% of this backlog into actual revenue each year. If true, we’re looking at potential revenues of $6-7.5 billion in 2026, without even counting new business.
But here’s the catch – this entire castle is built on a foundation that has some serious cracks.
The Microsoft Problem: When One Customer Rules Your World
Here’s the part that should make any investor nervous: Microsoft alone accounted for 72% of CoreWeave’s Q1 revenue. Nearly three-quarters of their entire business depends on one customer.
Then there’s OpenAI, which has committed $16 billion to CoreWeave ($11.9 billion announced in March, plus another $4 billion in May). These aren’t just big customers – they’re existential dependencies.
Felix Wang from Hedgeye Risk Management (who admits he’s betting against the stock and losing money doing so) raises a crucial question: “What happens if Microsoft decides to build their own data centers? Or if they switch to custom chips instead of Nvidia GPUs?”
It’s a valid concern. Companies like Broadcom are already making custom AI chips that could potentially replace Nvidia’s more general-purpose GPUs. If that happens, CoreWeave’s entire business model could become obsolete overnight.
The Debt Mountain: Borrowing Your Way to the Top
Now let’s talk about the elephant in the room – CoreWeave’s debt structure.
They’re forecasting $20-23 billion in capital expenditure for 2025 alone. That’s nearly 5 times their projected revenue of around $5 billion. They’re essentially borrowing against their current GPUs to buy newer, more powerful ones.
Credit rating agency Fitch puts CoreWeave’s gross debt leverage at 6.7x EBITDA, is “elevated.” Even if profits grow as expected, they project leverage to only come down to 5.7x.
It’s like taking a loan against your current car to buy a newer one, hoping the newer car will generate enough income to pay back the loan before it depreciates. It works beautifully when everything goes right, but one hiccup can create a devastating spiral.
The OpenAI Dependency: A Chain of IOUs
The company’s dependency on OpenAI is also a concern for the investors.OpenAI is burning through cash and continuously raising capital to fund both its $16 billion commitment to CoreWeave and its $19 billion commitment to the Stargate AI data center project (which is reportedly struggling).
OpenAI’s biggest backer, SoftBank, also carries significant debt. It’s like a chain of IOUs – if any link breaks, the whole thing could collapse.
Imagine lending money to a friend who borrowed it from another friend who got it from a loan shark. If the loan shark comes calling, everyone in the chain is in trouble.
The Valuation Puzzle: Expensive Gamble or Future Gold Mine?
At current valuations, CoreWeave is trading at 18.6x trailing EV/Sales and an eye-popping 179.7x EV/EBIT. Those numbers make even the most optimistic investor pause.
But CoreWeave bulls argue this misses the point. The company is in a transformation phase from infrastructure builder to AI monetization platform. With forward EV/Sales of around 10x, they argue it’s reasonable for a company expecting 5x revenue growth in 2025.
The GPU-as-a-Service market is projected to grow at 22.9% CAGR through 2030. If CoreWeave can maintain their position as category leader while diversifying their customer base, a 25x multiple on $2.4 billion EBITDA could justify a $60 billion+ enterprise value.
That suggests significant upside, but only if everything goes according to plan.
The Diversification Play: Beyond the Hyperscalers
Recognizing their concentration risk, CoreWeave is trying to diversify. They recently acquired Weights & Biases, which brings 1,400 enterprise customers. The strategy is to move beyond serving just hyperscalers (companies like Microsoft and Google) to capturing the broader enterprise AI market.
Think of it like Netflix expanding from just streaming movies to creating original content. It’s a logical evolution, but it requires different skills and faces different competition.
CoreWeave isn’t just a stock – it’s a referendum on the future of artificial intelligence.
Buying shares means betting that:
- AI demand will continue growing exponentially for years
- Companies will prefer renting AI infrastructure to building it themselves
- CoreWeave can successfully diversify beyond their current mega-customers
- Their debt-fueled growth model is sustainable long-term
- Nvidia GPUs will remain essential for AI workloads
If those bets pay off, CoreWeave could become one of the most valuable infrastructure companies in the world, potentially worth $100 billion or more. If they don’t, it could become a cautionary tale about the dangers of leverage, customer concentration, and betting too heavily.
