CoreWeave (CRWV -7.63%) has been one of the hottest stocks on the market in 2025 since going public around three months ago, rising an incredible 360% as of this writing thanks to the booming demand for the company's artificial intelligence (AI) cloud computing infrastructure.
The tech start-up was initially in the business of cryptocurrency mining but pivoted to providing graphics processing units (GPUs) for companies to rent following a sharp decline in crypto prices. That move has turned out to be a smart one as companies have been rushing to rent CoreWeave's cloud computing infrastructure to train and deploy AI models and applications.
But will this high-flying AI stock be able to sustain its stunning growth and deliver more gains to investors following its massive run-up in the space of just three months? Let's find out.
Image source: Getty Images.
CoreWeave's incredible growth seems sustainable
When CoreWeave released its first-quarter results last month, it reported an incredible year-over-year growth of 420% in revenue to $982 million. The company attributed this terrific jump to the addition of new customers as well as the expansion of its existing agreements with many of its large customers. The jump in spending on CoreWeave's AI infrastructure by both current and new customers led to an expansion of four percentage points in its adjusted operating margin to 17%.
The company built its business by offering customers access to top-of-the-line GPUs from Nvidia. CoreWeave management claimed on the latest earnings conference call that it was the "first to deploy GB200 Grace Blackwell systems at scale on our AI cloud platform." This suggests that CoreWeave is set to replicate its strategy of offering Nvidia's flagship chips to customers in large numbers to help them tackle their AI workloads.
For instance, it has already been offering Nvidia's previous generation Hopper chips -- the H100 and the H200 GPUs -- to customers at scale, which has allowed it to build up a revenue backlog and land some of the top AI companies as clients. This explains why it has landed a contract worth almost $12 billion with OpenAI while also signing a $4 billion contract with a large AI enterprise provider.
The new contracts took CoreWeave's revenue backlog to nearly $26 billion at the end of Q1, an increase of 63% from the year-ago period. That figure is way above the company's 2025 revenue guidance of $5 billion, which is nearly 2.5 times its 2024 revenue of $1.9 billion. Importantly, CoreWeave sees its total addressable market growing to $400 billion by 2028, which explains why analysts are expecting the company's top-line growth to remain solid over the next three years.
CRWV Revenue Estimates for Current Fiscal Year data by YCharts
Aggressive capacity investments should be a tailwind for the stock
The lucrative end-market opportunity and the huge revenue backlog also tell us why the company is investing aggressively to expand its data center capacity. CEO Michael Intrator remarked on the latest earnings conference call, "Today, we benefit from a network of 33 purpose-built AI data centers across the U.S. and Europe, supported by 420 megawatts of active power. Our total contracted power extends to approximately 1.6 gigawatts, providing us with a durable multiyear runway in power capacity."
So, CoreWeave's data center capacity is on track to grow by 4 times going forward as per its current contracts. However, setting up that data center capacity is going to require huge investments. This explains why the company is anticipating its capital expenditure to land in the range of $20 billion to $23 billion in 2025, which would be a huge jump over the 2024 capex of $8.3 billion.
Importantly, CoreWeave points out that it raised more than $21 billion to aid its expansion efforts. This huge war chest should come in handy for the company as it is competing with cloud computing giants such as Oracle (ORCL -2.20%) and others who are also renting out their infrastructure to help train and deploy AI models and applications.
Oracle, for instance, reported $138 billion in remaining performance obligations (RPO) at the end of the previous quarter. This metric, which refers to the total value of a company's contracts that are yet to be fulfilled, increased 41% year over year as the demand for its cloud computing infrastructure remained robust.
What's more, Oracle's capital expenditure is forecast to jump by 20% in the current fiscal year to $25 billion as it is going to bring online more capacity to meet its huge revenue backlog. It is worth noting that Oracle's capex more than tripled last year. CoreWeave, therefore, is going toe-to-toe with much larger competitors in terms of capex. That could pay off big time over the next three years as it should ideally be able to convert its backlog into revenue at a faster pace and also attract more customers.
Of course, the massive capex will keep CoreWeave's bottom line under pressure in the near term, but analysts are expecting the company to become profitable by 2027.
CRWV EPS Estimates for Current Fiscal Year data by YCharts
But what about the valuation?
CoreWeave stock's phenomenal run-up in the past three months has made it expensive. It is trading at 31 times sales, which is almost 4 times the U.S. technology sector's average sales multiple of 8. But then, this expensive multiple is justified by the pace of the company's growth and the incredible room it has to keep growing at eye-popping levels in the next three years.
For some perspective, AI companies like Palantir Technologies and SoundHound AI are trading at expensive sales multiples of 110 and 35 despite a slower rate of revenue growth when compared to CoreWeave. So, CoreWeave doesn't look all that expensive when we take a look at how other fast-growing AI stocks are valued.
But even if CoreWeave trades in line with the U.S. technology sector's average sales multiple after three years and generates $16.6 billion in revenue for 2027 (as seen in the first chart), its market cap could jump to $133 billion. That points toward a potential jump of 51% in the next three years from its current market cap.
However, there is a strong possibility of CoreWeave recording stronger revenue growth, which is why the market could continue rewarding it with a premium valuation. That's the reason why the stock could deliver even better gains in the next three years as compared to what I predicted in the previous paragraph.
