Spending on artificial intelligence (AI) data centers is staggering. This year, just four companies are on track to spend more than $350 billion and are set to spend at least $400 billion in 2026. To put that into perspective, adjusted for inflation, the entire Apollo program -- which put humans on the Moon -- spent less than $300 billion over 10 years.
CoreWeave (CRWV -6.35%) is right in the middle of this data center boom, buying Nvidia's top chips and renting them out to companies like Microsoft. The opportunity here is massive, but so is the risk, as the company continues to fuel its growth with debt.
1. CoreWeave has a $30.1 billion backlog
The company fills the substantial gap that exists between demand for AI computing power and current supply. It's what has led CoreWeave's top line to explode, up more than 200% year over year as of its second-quarter report. The jump from under $400 million in Q2 2024 to more than $1.21 billion in Q2 2025 is incredible, but can it continue?
The $30.1 billion in backlog sure makes it seem so, at least for the foreseeable future. That's $30.1 billion in sales lined up so long as the company follows through on its commitments and can build out the capacity needed to fill those orders.
There's a wrinkle here, however. While the $30.1 billion is a significant increase from last quarter's $25.9 billion, the company had already announced a $4 billion deal with OpenAI in its last earnings that accounted for the bulk of the quarter-over-quarter jump. CoreWeave only booked $1.4 billion in new contracts this quarter -- not as much as might have been expected.
2. CoreWeave spent a record $2.9 billion in capex
The company spent $2.9 billion in capital expenditures (capex) in Q2, the bulk of which went toward purchasing Nvidia's hyper-advanced data center chips as it tries to meet the demand. Management has to make sure that it spends cash now to have chips available when customers need it; as best it can, it needs to anticipate demand, but it doesn't want to overspend if it can avoid it -- these chips aren't cheap. That makes capex a useful indicator of where the company thinks that demand will be in the future.
Image source: Getty Images.
And while a record-setting capex would seem at first blush to mean all is good, the $2.9 billion was actually lower than Wall Street expected and could indicate demand is not as strong as hoped.
3. CoreWeave's debt continues to grow, topping $11 billion
In order to scale at its lightning-fast pace, the company is making use of debt -- a lot of it. In Q2, the company's total debt reached more than $11 billion, and analysts believe it could add another $10 billion by year-end. Just to service the interest on this debt, the company paid nearly $270 million in the second quarter. That's extremely high. In fact, CoreWeave paid more than 13 times its operating income just to cover the interest on its debt. And if it indeed adds another $10 billion to its debt load before 2025 is done, that multiple could be even worse.
And while many companies effectively leverage debt to scale, the assets the company is buying with this debt don't have that long a useful life. These aren't loans for a gas pipeline that will last decades. These are high-interest loans for chips with shelf lives of a few years.
CoreWeave is riding the edge
CoreWeave's growth is built on too rocky a foundation for my taste. While the blistering pace and massive backlog are reassuring in the near term, there are already some cracks. But relying on high-interest debt to play the middleman in AI doesn't seem like a long-term winning strategy to me.
There will likely come a time when the Microsofts of the world prefer to cut out the middle man and drive down their own margins. And even if that doesn't happen, if AI demand cools even slightly, CoreWeave could be left out to dry, given its reliance on high-interest debt. I would avoid CoreWeave stock.
