Shares in CoreWeave, a high profile artificial intelligence initial public offering this year, popped on Thursday in the wake of earnings reports from Microsoft and Facebook-parent Meta Platforms. With Thursday's gain, CoreWeave stock moved above its IPO offer price.
First quarter earnings for CoreWeave stock are due May 14. A cloud computing software services provider, CoreWeave processes AI workloads on Nvidia chip-equipped servers.
On the stock market today, CoreWeave stock popped over 15% to 47.74 in morning trading. With Thursday's gain, CoreWeave shares moved above the IPO offering price of 40.
Nvidia stock on Thursday rose 4%.
Meta on Wednesday issued a stronger-than-expected sales forecast and beat first-quarter estimates. The social media giant also increased its 2025 spending forecast for capital expenditures, with a focus on its AI-related growth. Meanwhile, Microsoft crushed Wall Street's targets for its fiscal third quarter.
"Meta, Microsoft and (Alphabet's) Google reported strong capital spending growth in the March quarter, with the three U.S. cloud service providers together reporting strong double-digit growth year-over-year in aggregate (+60%)," said JPMorgan analyst Samik Chatterjee in a report. "Importantly, the raised full-year outlook from Meta, the reiterated fiscal second half outlook from Microsoft, and the reiterated full-year outlook from Google implies that the solid investment momentum is continuing through the year."
Customer Concentration An Issue
Morgan Stanley, meanwhile, projected that CoreWeave will spend $10 billion in 2025 on its data center build-outs.
CoreWeave's data centers are designed from scratch for AI workloads.
"Gen-AI is at the center of CoreWeave's market opportunity as the company provides access to a modernized tech stack configured specifically for the unique technical requirements of AI workloads," said Goldman Sachs analyst Kash Rangan in an initiation report on CRWV stock.
He added: "CoreWeave's ability to diversify its customer concentration will likely be the main near-term indicator investors look to gain comfort around the company's long-term revenue durability. While we view the company's go-to-market shift augmenting the market's expansion to support the longer-term broadening out of end-users, the large contracts CoreWeave has today will likely leave these dynamics largely unchanged in the near-term."
In 2024, 77% of CoreWeave's revenue came from two customers, with Microsoft accounting for 60%. While some analysts project a big AI market opportunity for CoreWeave, others fret about customer concentration and debt. From an accounting view, high depreciation on data center servers is another concern because it lowers earnings.
Meanwhile, Microsoft is the biggest investor in generative AI startup Open AI, which is the leader in building AI models and launched ChatGPT.
CoreWeave Stock: Technical Ratings
CoreWeave and the other cloud infrastructure startups rent Nvidia-chip equipped computer servers to artificial intelligence app developers.
While there's always a tight supply of Nvidia AI chips, CoreWeave and others stand out by their ability to buy Nvidia devices, including its newest Blackwell accelerators. Nvidia owns a 5% stake in CoreWeave.
CoreWeave was founded as a cryptocurrency miner in 2017 before its move into cloud computing services.
Meanwhile, CoreWeave stock owns a Relative Strength rating of 78 out of a best possible 99. Also, CoreWeave stock has a relatively small float, making it more volatile.
Additionally, CoreWeave is among the top artificial intelligence stocks to watch.
If you're new to IBD, consider taking a look at its trading system, especially for bull and bear markets, the basics of technical analysis and recognizing base patterns. One great resource is Investor's Corner. Give thought to monitoring updates to IBD stock watch lists.
IBD offers a broad range of growth stock lists. Amid market volatility, here are some useful strategies. Meanwhile, IBD doesn't put much weight on P/E ratios and other valuation metrics. On the other hand, here are some time-tested trading rules.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
