When most people think of Amazon (AMZN 1.43%), they think of its sprawling e-commerce business. That shouldn't be surprising, as it's the part that most people interact with weekly (sometimes daily). However, the e-commerce part of Amazon's business isn't what has made it a successful investment in recent years.
Its cloud computing unit, Amazon Web Services (AWS), has been a huge reason for its success. However, cloud computing isn't unique to Amazon, and there are several other viable competitors in this space, including one upstart that could be well-positioned to thrive over the next few years. Could this company become the Amazon of the 2030s? Let's take a look.
Image source: Getty Images.
Amazon isn't as focused on AI as CoreWeave is
The company that has the potential to be the Amazon of the 2030s in the cloud realm is CoreWeave (CRWV 1.93%). CoreWeave operates in the cloud computing industry, but is focused on clients that need artificial intelligence computing power. This changes what computing units are most appropriate for users and how the infrastructure is set up when its sole purpose is AI workloads, and CoreWeave is delivering.
Amazon and its peers in the cloud realm also have AI-specific offerings, but CoreWeave's rapid growth shows that it's doing something right. It has major clients like OpenAI, Microsoft, and Meta Platforms, and expects its monster growth to continue in the future. During Q3, CoreWeave's revenue rose 134% year over year to $1.4 billion. That's a drop in the bucket compared to what's coming, as CoreWeave has a $55.6 billion revenue backlog from contracts that it has signed. Forty percent of that revenue is expected to be realized over the next 24 months.
NASDAQ: CRWV
Key Data Points
CoreWeave's revenue totaled $4.3 billion over the past 12 months. If it realizes 40% of its backlog in the next two years, that would indicate $22.2 billion in revenue. This indicates that CoreWeave's revenue will nearly double each of the next two years (just shy of $8 billion in 2026 and $16 billion in 2027).
That's exciting growth that investors love to see, and it could propel CoreWeave to duplicate Amazon's impressive performance over the next few years. However, there's one catch.
CoreWeave's capital expenditure costs are mind-boggling
It's no secret that data centers and the cutting-edge graphics processing units (GPUs) that go into them are expensive. As the old saying goes you need to spend money to make money, but CoreWeave is taking that to the max. Despite generating $4.3 billion in revenue over the past 12 months, it spent nearly $10 billion on capital expenditures.
CRWV Revenue (TTM) data by YCharts
That doesn't include the costs to pay employees or electricity to run the data center, so it's clear that CoreWeave is losing a ton of money. This is a huge problem, as the lifespans of GPUs may be as short as one year when run in hard use cases like AI training.
The only way CoreWeave becomes the next AWS is if it becomes profitable, which may be a few years from now. CoreWeave must continue signing new clients to its servers in order to maintain investor interest; otherwise, it may have a tough time finding capital to fund its buildings if it keeps losing money.
While I love the cloud computing business model and believe CoreWeave could be successful in the future, I want to see further progress toward profitability before I invest. There are far too many great opportunities to invest in right now, like those providing the computing units, that are profitable and are still growing at a rapid pace. CoreWeave hasn't come close to profitability, and until it does, I think investors are better off investing elsewhere.
