When CoreWeave's initial public offering ran into headwinds in March, strategic partner Nvidia stepped up. The maker of AI accelerator chips — already a 5% stake holder — bought $250 million of CoreWeave stock, anchoring the IPO.
Analysts call Nvidia's relationship with the artificial intelligence startup "symbiotic." Nvidia could get a handsome payback from its CoreWeave investments. But that depends on whether CoreWeave's business model holds up amid fierce competition in artificial intelligence and cloud computing.
A new cloud computing services provider, CoreWeave rents out Nvidia accelerator-equipped servers that crunch artificial intelligence workloads. AI accelerators speed up the processing of software algorithms. Nvidia's roots are in graphical processing units, or GPUs, which can handle AI tasks.
Nvidia initially invested $100 million in CoreWeave in April 2023.
"In some ways, CoreWeave exists because Nvidia wants it to exist," said MoffettNathanson analyst Nick Del Deo in a report.
Today, Nvidia is by far the leading provider of accelerator chips used to train AI models or process AI software applications. Its biggest customers have been cloud computing giants Amazon Web Services, part of Amazon.com, Microsoft and Alphabet's Google. But the cloud titans have been designing their own AI accelerators, aiming to reduce their dependence on Nvidia and increase their bargaining power.
Competing Against Cloud Giants
Amazon, Meta Platforms, Microsoft and Google have deployed — or plan to deploy — their own custom silicon, Del Deo said in his report.
"Nvidia naturally wants to protect its business from these risks, and one way it is trying to do so is by supporting alternative cloud service providers with capital, access to chips and contracts to lease infrastructure," he said. "CoreWeave has benefited tremendously from Nvidia's support across each of those dimensions."
Del Deo has a hold rating on CoreWeave stock.
In 2023 and 2024, CoreWeave emerged as a provider of AI computer services amid a shortage of Nvidia accelerators. Microsoft, IBM, Meta and AI startups such as Cohere and Mistral turned to CoreWeave, which had access to the newest and most powerful Nvidia chips.
Morgan Stanley estimates that CoreWeave gets about 8% of Nvidia's AI accelerator production annually. Goldman Sachs noted in a report that CoreWeave gets "priority allocation of in-demand GPUs." With a track record of being first to deploy next-generation accelerators, CoreWeave serves as a test bed for cutting-edge Nvidia products.
Preferred Access To Nvidia Chips
D.A. Davidson analyst Gil Luria said in a report: "We believe Nvidia created CoreWeave in order to apply competitive pressure on its largest customers and create artificial scarcity."
Luria rates CoreWeave stock as underweight.
Goldman Sachs says CoreWeave's attraction to customers lies in its "preferred access" to Nvidia AI accelerators — including "Blackwell" devices now ramping up in production. CoreWeave is also expected to be an early provider of upcoming "Rubin Ultra" GPUs due out in 2027 and "Feynman" GPUs in 2028.
Investors may underappreciate the importance of Nvidia's backing for CoreWeave, JPMorgan analyst Mark Murphy said in a report.
"In our view, any hyperscaler with clearly stated intentions to compete at the GPU level of the stack (such as Amazon or Google) has declared itself to be a longer-term adversary of Nvidia, and this should motivate Nvidia to fragment and disrupt the traditional hyperscaler landscape," he said.
Microsoft has been by far CoreWeave's biggest customer, accounting for 62% of revenue in 2024. Nvidia ranked second, accounting for 15% of CoreWeave revenue.
CoreWeave Stock Faces IPO Setback
CoreWeave's IPO was downsized amid worries over customer concentration, analysts say. But CoreWeave has been diversifying its customer base.
CoreWeave recently signed a five-year deal with OpenAI, the leading developer of AI models and creator of ChatGPT. OpenAI has committed to $11.9 billion in payments over five years. Also, OpenAI is making a $350 million equity investment in CoreWeave stock as part of the deal.
In addition, CoreWeave will soon bring on Google as a new customer, according to reports.
This month, CoreWeave completed the $1.7 billion acquisition of Weights & Biases, which operates an AI developer platform.
CoreWeave aims to provide software tools that help companies fine tune AI models. Many companies aim to customize large language models (LLMs) with their proprietary data.
At the lower end of the market, CoreWeave competes with many emerging cloud vendors, such as Crusoe, Lambda, Nebius Group, Vultr and DigitalOcean Holdings. Crusoe is heavily involved in OpenAI's "Stargate" project backed by Japan's SoftBank.
Capital Spending Is On The Rise
While CoreWeave has been adding top-end clients, capital spending has exploded as it leases more data center space and adds specialized infrastructure. CoreWeave uses liquid cooling for servers, high-density power distribution units, high-speed networking and fiber-optic connections to boost AI processing performance.
CoreWeave operates 33 AI data centers across the U.S. and Europe, supported by 420 megawatts of power. Data centers are often measured in terms of their power consumption. CoreWeave holds total contracted data center power of roughly 1.6 gigawatts, four times its current level. A gigawatt is 1,000 megawatts.
In 2025, CoreWeave expects its capital spending to jump 53% to about $21.5 billion.
Specialized AI Infrastructure
Chief Executive Michael Intrator says the company's cloud platform is purpose-built. General purpose cloud infrastructure wasn't built to support the scale and complexity of AI, he said on the first-quarter earnings conference call with analysts.
"These clouds were built to host websites and run software applications, not to run high-performance training and inference workloads," he said. "Our cloud platform has been architected to optimize for the needs of AI at every layer."
But CoreWeave continues to pile on debt, which stands at about $8.5 billion. Interest expenses are rising and high depreciation on data centers weighs on earnings. After a scaled-back IPO, CoreWeave plans to raise $1.5 billion in a new credit facility.
The bearish view is that with a high cash-burn business model, CoreWeave could wind up with underutilized data center capacity if contracts aren't renewed. But, after initially falling 2.5% post-earnings, CoreWeave stock has continued to rise, tacking on a gain north of 56% in a week, as of Friday's close.
Mismatched Leases And Contracts
But Fitch Ratings notes a mismatch in the timing of CoreWeave's leases with data center suppliers and its contracts with customers. Its leases typically span three to 15 years, while its contracts generally run for three to five years, the credit rating agency said in a report.
"This disparity creates challenges in aligning long-term obligations with shorter-term revenue streams, exposing CoreWeave to the risk of meeting lease commitments without guaranteed customer income," Fitch Ratings wrote. "The company typically manages this risk by building enough of a buffer into their contract terms to mitigate the impact of contract length mismatches."
Still, CoreWeave had gained nearly 157% from its IPO price at nearly 40 per share. Many analysts expect CoreWeave stock to remain volatile, given the small float of shares available for public trading. Meanwhile, Nvidia stock is down 2% this year.
CoreWeave Stock: Earnings Report
In its first earnings report as a public company, CoreWeave posted a loss of $1.49 per share, including stock-based compensation tied to the IPO, widening from a 62-cent per-share loss in the year-ago period. That beat projections for a 12-cent loss per share, according to Goldman Sachs.
Revenue rose 420% to $981 million, also topping expectations for $857.1 million.
CoreWeave told analysts that remaining performance obligations — signed contracts that don't yet generate revenue — fell to $14.7 billion from $15.1 billion at the end of 2024. But that excluded the new OpenAI deal.
CoreWeave expects 2025 revenue of $5 billion at the midpoint of guidance, topping estimates of $4.65 billion. Bullish analysts point to CoreWeave's widening customer base.
In 2026, Goldman Sachs expects Microsoft to account for only 38% of revenue, leaving 6% from Nvidia and OpenAI at about 21%.
Still, cloud computing competition continues to intensify with new entrants challenging Amazon, Microsoft and Google. Prices for renting AI accelerators could soften, especially if the U.S. economy falls into a recession.
Eight out of 18 analysts surveyed by FactSet rate CoreWeave stock a buy or buy-equivalent.
'Nvidia Put' On CoreWeave Stock?
Some analysts expect CoreWeave's ties to Nvidia to remain a plus. Nvidia holds a 7% stake in CoreWeave.
Someone could buy CoreWeave — if things go south or if it outperforms, said MoffettNathanson's Del Deo.
"The company arguably has an embedded 'Nvidia put,' since it's such an important end market for Nvidia products and a counterweight to the hyperscalers," he said. "So Nvidia could acquire it in a downside case. On the flip side, it's conceivable that a hyperscaler could go after CoreWeave if it is super successful and one of them wants to fold it into their platform to capture the magic."
An S&P Global Ratings report noted that some shareholders hold special option rights tied to the CoreWeave stock IPO.
"These rights entitle holders to require the company to repurchase their shares for cash if the stock fails to trade at or above 175% of the $38.95 issue price for any 30 consecutive trading days within two years post-IPO or if these shares are sold or transferred. While the full $1.2 billion repurchase obligation appears unlikely, given current trading levels and 19 months until expiration, the structure introduces a contingent liability that could pressure liquidity," according to the report.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
