Last week, it doubled in a single week, rising 300% since its listing. "NVIDIA's favorite child" CoreWeave is currently very popular in the US stock market
The core logic driving the surge in CoreWeave's stock price lies in its perception as one of the few public market tools that allows investors to indirectly bet on the success of OpenAI, while also being a preferred partner of NVIDIA. Analysis suggests that CoreWeave's IPO lock-up period will expire in September, which could become a key moment in determining the direction of its stock price
CoreWeave's stock price skyrockets again: bubble or opportunity in the AI craze?
Overnight, CoreWeave, known as the "favorite child of NVIDIA," saw its stock price surge again, rising over 15% and more than 300% above its issue price.
Last Monday, data center company Applied Digital announced it had signed two 15-year lease agreements with CoreWeave, a major news that quickly ignited market sentiment. CoreWeave's stock price soared more than 40% in the following days, rising over 250% from its issue price, becoming the focus of the tech sector.
Industry insiders believe this not only reflects the market's recognition of CoreWeave's position in the AI infrastructure field but also highlights investors' hunger for AI-related assets.
Large Lease Deals Ignite Market Enthusiasm
The core logic driving CoreWeave's stock price surge is that CoreWeave is seen as one of the few public market tools that allow investors to indirectly bet on OpenAI's success.
It is reported that as a private company, ordinary investors cannot participate in OpenAI, but it holds shares in CoreWeave and has signed a cloud infrastructure supply contract worth billions of dollars with the latter, lasting until April 2029.
Additionally, CoreWeave is currently the preferred partner of NVIDIA, the highest-valued company globally, and is referred to as "NVIDIA's favorite child." This multiple endorsement has made CoreWeave a dazzling "spokesperson" in the AI craze.
Performance Supports Optimistic Expectations
CoreWeave's financial performance further fuels market enthusiasm.
Data shows that CoreWeave's revenue in the first quarter reached $981.6 million, a staggering 420% year-on-year increase, exceeding expectations by over 10%, and the second-quarter forecast is also above market consensus.
Mizuho analyst Gregg Moskowitz gave the stock an "outperform" rating in a mid-May report, stating that CoreWeave is "capturing market share in the AI cloud services market at a staggering pace."
From IPO Low to Short Squeeze, Volatility Becomes the Focus
Despite the strong current stock performance, just two months ago, CoreWeave's IPO performance was quite lackluster.
When the company went public, it lowered its price range, and the first-day closing price was only one cent higher than the $40 IPO price, with a tepid market response. However, the subsequent dramatic rebound in stock price, especially the enthusiasm from retail investors, inevitably brings to mind the short squeeze frenzy of GameStop in 2021.
Currently, CoreWeave's short interest accounts for about 8.44% of its float, significantly higher than the average level of 2% to 5% for U.S. stocks, and the stock's low float further amplifies its volatility Hedgeye Risk Management Managing Director Felix Wang insists on shorting the stock, despite facing significant losses. He compares CoreWeave to WeWork during its failed IPO in 2019.
Key risks pointed out by Wang include: a debt-to-equity ratio as high as 387%, a negative profit margin of 38.7%, total debt of $11.9 billion with only $1.28 billion in cash. More concerning is that Microsoft contributed over 70% of CoreWeave's revenue last quarter, indicating a significant risk in this extreme reliance on a single customer.
Wang further questions, why CoreWeave still needs to pay high-interest debt of 10% to 15% to creditors like BlackRock, given that most of its clients are AAA-rated companies.
D.A. Davidson Research Director Gil Luria also gives the stock an "underperform" rating, citing that the massive debt obligations leave equity holders with a very small share of the company. He believes that Microsoft and Google are developing directly competitive products,
“Their collaboration with CoreWeave is merely a result of temporary chip supply constraints, and once their in-house capabilities are fully developed during the contract period, CoreWeave's order demand will significantly shrink.”
Analysts point out that the real test will come in September.
At that time, the IPO lock-up period for CoreWeave will expire, and restricted shareholders will be able to sell their holdings, which could be a key moment in determining the direction of CoreWeave's stock price.
