When it comes to artificial intelligence (AI) chip stocks, names such as Nvidia, Broadcom, Advanced Micro Devices, and Taiwan Semiconductor Manufacturing dominate the talking points among financial circles.
These companies are at the forefront of designing and manufacturing advanced chipsets known as graphics processing units (GPUs). While investing in semiconductor stocks has generally been a great idea over the last two years, the stocks above have taken a bit of a breather during 2025. Uncertainty around tariff negotiations and particularly exposure to China have investors trimming their gains and looking elsewhere for now.
One opportunity that has emerged as a new favorite among chip stocks is CoreWeave (CRWV +10.87%), which went public back in March. Since the initial public offering, shares of CoreWeave have rocketed by 251% as of the closing bell on June 6.
Is now the time to get in on the CoreWeave trade, or is the company quickly becoming Wall Street's next big meme stock?
NASDAQ: CRWV
Key Data Points
CoreWeave plays an important role in the AI landscape, but...
For the last couple of years, investors could not stop buying chip design and manufacturing stocks. And to be completely honest, I think companies such as Nvidia, AMD, Broadcom, and Taiwan Semi all have bright futures.
For instance, global management consulting firm McKinsey & Company recently reported that nearly $7 trillion could be allocated toward AI infrastructure spend over the next five years. Within these capital expenditures, the largest allocation is forecast to go toward hardware for AI data centers.
These secular tailwinds may be justified by ongoing infrastructure initiatives such as Project Stargate here in the U.S. as well as similar buildouts overseas -- particularly across the Middle East.
While this is all great for Nvidia and its peers, why are investors flocking to CoreWeave as of late?
My thinking is that the company's unique business model is becoming increasingly favored among chip stock investors. Allow me to explain.
CoreWeave offers an infrastructure services business in which customers can access clusters of Nvidia GPUs among other architectures via the cloud. This is an interesting model, as it essentially allows generative AI developers an efficient way to access the industry's best hardware without needing to directly order it, wait for the chips to be manufactured, and then work with integrated systems designers to build custom training and inferencing clusters.
Image source: Getty Images.
...does the company's valuation make sense?
At the end of the first quarter (March 31), CoreWeave boasted $14.7 billion in remaining performance obligations plus another $11.2 billion in committed contracts from a strategic deal signed with OpenAI.
Given the company has roughly $25.9 billion in backlog, let's see how quickly Wall Street thinks CoreWeave can recognize this growth.
CRWV Revenue Estimates for Current Fiscal Year data by YCharts
In the chart above, investors can see that the general consensus among analysts is for CoreWeave to roughly triple its revenue over the next two years as well as transition to a profitable business. Overall, I'd say this is a bright picture.
However, CoreWeave's valuation suggests that most (if not all) of this good news is priced into the stock already.
CRWV PS Ratio data by YCharts
Not only is CoreWeave's price-to-sales ratio far higher than more mature and diversified data center infrastructure businesses such as Oracle and Vertiv, but the company's multiple continues to expand.
Is CoreWeave stock a buy right now?
I see the appeal of investing in infrastructure services businesses as part of the broader AI equation. But right now, CoreWeave is experiencing outsized levels of valuation expansion -- leaving little to no room for error when it comes to an investment. Said differently, buying a stock at record levels requires a high conviction that the price will continue rising.
While that may well be the case for CoreWeave in the long run, I think investing in the company at its current price isn't prudent. Investing in momentum stocks can be a risky strategy, and to me, I would not be surprised to see CoreWeave's price normalize sooner than later. The bright side is that if CoreWeave shares begin to show some weakness, that could be an opportunity for smart investors to buy the dip.
So while I think CoreWeave could be a winner in the long run, I think there are more reasonable opportunities to buy the stock as opposed to right now. For the time being, I do see CoreWeave exhibiting some characteristics of a meme stock, and I think shares are best left avoided.
