CoreWeave (CRWV) stock whipsawed Thursday as investors digested its high capital expenditure forecast and a new $4 billion deal with OpenAI.
Shares of the Nvidia-backed (NVDA) AI data center firm rose as much as 8% and fell as much as 9% during the trading session before ending the day down around 2.5%.
CoreWeave’s capital expenditure outlook, coming as part of its first-ever earnings update as a public company, raised concerns from Wall Street. CoreWeave executives said the company expects to spend $20 billion to $23 billion in 2025, more than the $18.3 billion projected by Wall Street analysts, according to Bloomberg consensus estimates.
The company is one of the largest holders of Nvidia’s graphics processing units and rents its data center capacity to Big Tech firms such as Microsoft (MSFT) and Meta (META) as they scramble to power their AI ambitions.
DA Davidson analyst Gil Luria downgraded the stock to an Underperform rating from Neutral on Thursday morning, citing the “level of capital intensity equity investors are unlikely to stomach.”
Luria also noted CoreWeave’s soaring interest expenses, or payments on the debt it has used to fund its business. The company’s interest expenses rose 549% to $264 million in the first quarter, more than the $182 million expenses projected by Wall Street, per Bloomberg data.
CoreWeave has a significant amount of debt — roughly $12 billion worth of debt commitments with very high interest rates, according to Luria. CoreWeave uses its debt, borrowed against its store of Nvidia GPUs as collateral, to buy more Nvidia chips.
“The risk is this is a company that is borrowing at extraordinarily high interest rates in order to buy a product that depreciates very rapidly in terms of its economic value,” Luria told Yahoo Finance in an interview Wednesday.
CoreWeave CFO Nitin Agrawal said that the higher spending is “fundamentally driven by increased customer demand.”
Even with Thursday’s dip, the stock was up more than 68% since its debut in March.
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Also on Thursday, CoreWeave said in a regulatory filing to the US Securities and Exchange Commission that it had secured a $4 billion deal with OpenAI in May in addition to its previously reported $11.9 billion commitment from the AI startup. CoreWeave said the OpenAI deals contributed to its high revenue outlook for the upcoming quarter and full year, which surpassed Wall Street’s expectations.
CoreWeave executives said in a call with analysts late Wednesday that they expect the company to record $1.06 billion to $1.1 billion for the second quarter and $4.9 billion to $5.1 billion for the full year, higher than analysts’ projections of $1.04 billion for the second quarter and $4.6 billion for the year, according to Bloomberg data.
Some 72% of CoreWeave’s $981.6 million first quarter revenue came from Microsoft, according to its SEC filing Thursday. Most of Microsoft’s spending with CoreWeave has gone toward powering services for OpenAI, said Luria.
CoreWeave raised $1.5 billion in its IPO in March — much lower than the $4 billion it had initially hoped to raise — with the stock whipsawing as Wall Street and investors weighed its risky financials against bullish outlooks for AI demand. Ahead of Wednesday’s earnings release, CoreWeave stock was up 66% since the company’s market debut.
CoreWeave, overall, is still losing money. The company reported an adjusted net loss of roughly $150 million for the first quarter, steeper than the $41.7 million loss expected, per Bloomberg data.
Some seven analysts tracked by Bloomberg hold Buy ratings on the stock based on booming AI demand, while eight have a Neutral rating.
Stifel analyst Ruben Roy, who holds a Buy rating, wrote in a note to investors Thursday: “We continue to view CRWV’s longer-term prospects positively given the company’s first to market positioning as a purpose built AI infrastructure provider.”
Macquarie analyst Paul Golding, who holds a Neutral rating, wrote in a note to investors Wednesday ahead of its earnings report that its “competitiveness, together with the outlook for the [AI] space, drives scope for further growth.”
Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
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