Shares of artificial intelligence (AI) "neocloud" company and recent IPO CoreWeave (CRWV 22.14%) rocketed higher Friday morning, increasing as much as 26.3% on the day, before settling into a 22.5% gain as of 1:15 p.m. ET.
It's interesting the stock had such a big jump today, as CoreWeave reported first-quarter earnings on Wednesday night, leading to a modest gain in response yesterday.
However, today's delayed jump today was likely fueled by two things. First, another two sell-side analysts raised their price targets on the company. Additionally, an SEC filing showed that chipmaker Nvidia (NVDA 0.28%) raised its existing stake in the data center operator shortly after its March IPO.
Nvidia the kingmaker?
This morning, a couple Wall Street analysts raised their price targets on CoreWeave in the wake of first-quarter earnings. JPMorgan Chase raised its price target to $66 from $43, and Needham & Co. lifted its price target to $75 from $55.
However, those price target increases likely weren't the reason for the massive jump today. After all, several other analysts raised their targets yesterday after the company reported earnings, with revenue handily beating analysts' expectations, and management raising its 2025 revenue outlook to $5 billion, above expectations for $4.6 billion.
Still, yesterday's positive reaction was somewhat muted, as CoreWeave also raised its capital spending outlook to $21.5 billion at the midpoint, also well above expectations of $18.3 billion.
So, the real reason behind the outsized gains today was likely a 13-F document filed by Nvidia last night. A 13-F filing is required for large hedge funds and corporations with significant equity shareholdings, which must disclose their buys and sells from the previous quarter. Last night's filing showed the AI chipmaking giant increasing its stake in CoreWeave by about 35%, from 17.9 million shares at the time of CoreWeave's IPO on March 28, to 24.2 million shares by the end of the month.
Given that Nvidia is thought of as the leading company with the most expertise in AI, the fact that it increased its stake in CoreWeave likely gave investors an additional shot of confidence in the stock.
Image source: Getty Images.
Is CoreWeave still a buy?
CoreWeave is a difficult company to value, as it has to raise capital to build very expensive data centers before it collects "rent" on its GPUs from outside AI and cloud companies. Furthermore, it has a high customer concentration, with Microsoft accounting for 62% of revenue last year.
Microsoft is actually reducing its dependence on CoreWeave, although some of that volume should be replaced by Microsoft investee OpenAI, which recently inked a deal with CoreWeave that could go as high as $11.9 billion. In addition, CoreWeave also said it had signed up a new hyperscaler customer on the earnings release, which is a good sign.
CoreWeave's market cap exceeded $37 billion by midday today, which is a little more than 7 times this year's revenue projections. That seems expensive on the surface for a capital-intensive company that is still inking net losses as it scales; that being said, CoreWeave has Nvidia's backing, and if the AI revolution leads to a decade of high growth ahead, the stock could very well justify its current share price.
As with all things AI, there's potentially big opportunity here, but also big risks.
