Shares of CoreWeave (CRWV +0.41%) are soaring this week, up 14.7% as of market close on Thursday. The jump comes as the S&P 500 and the Nasdaq-100 were up 1.1% and 1.6%, respectively.
The artificial intelligence (AI) cloud provider announced on Tuesday that it has signed a major deal with Meta Platforms. The deal will be worth up to $14.2 billion and lasts roughly six years, ending Dec. 14, 2031. Meta does, however, have the option to "materially expand" its commitment through 2032 if it so chooses.
CoreWeave shares are also getting a lift from Microsoft's chief technical officer (CTO), who told CNBC at a conference this week that regarding the lack of AI computing capacity, a "massive crunch is probably an understatement." Demand remaining white-hot is critical for CoreWeave's growth.
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Investors should remain cautious
NASDAQ: CRWV
Key Data Points
The opportunity for CoreWeave and other AI infrastructure providers is enormous, but so are the risks. The company already carries a significant debt load and will continually have to borrow more at high rates or dilute its shareholders through stock sales for the foreseeable future. If AI demand lags -- and that is a real possibility that investors need to consider -- CoreWeave will be in serious trouble.
I would stay away from CoreWeave stock.
