Nvidia (NVDA 1.53%) has become a cash-generating machine. As demand for its GPUs soars amid the AI boom, its free cash flow has climbed to $77 billion over the last 12 months. It recently put $2 billion of that cash to work, adding to its investment in CoreWeave (CRWV 2.71%). The chipmaker now owns 11.5% of the company.
CoreWeave is a "neocloud" company, specializing in data centers designed for AI training and inference. It builds data centers and rents them out to big tech companies, including Microsoft, Meta, and one of its biggest investors, Nvidia. The news of Nvidia's increased stake in the business sent CoreWeave shares higher, so investors may be wondering whether they should follow suit after the big move.
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Close ties with the AI leader
CoreWeave's tight relationship with Nvidia puts it in an excellent position to serve its customers. It has ample access to Nvidia's powerful GPUs, and the new deal with Nvidia ensures it'll be able to build new cloud infrastructure using Nvidia's Rubin platform, its Vera CPUs, and its BlueField storage system.
Additionally, Nvidia is acting as a backstop for CoreWeave's buildout. Nvidia is obligated to pay for any unused CoreWeave capacity through April of 2032, up to $6.3 billion.
The plan is to use the $2 billion cash infusion from the stock sale to accelerate CoreWeave's buildout of 5 gigawatts of AI data centers by 2030. But the cost of building those data centers is far greater than $2 billion. CoreWeave spent $1.9 billion on capital expenditures in the third quarter, and it spent $6.9 billion on "construction in progress," which it excludes from capex until its deployed. Meanwhile, the company's operating cash flow came to $1.5 billion through the first nine months of the year. As such, CoreWeave will still need to take on substantial debt to accelerate its data center buildout plans.
NASDAQ: CRWV
Key Data Points
Taking on more debt
Lenders are willing to give CoreWeave money based on its close relationship with Nvidia (and its backstop) and the massive backlog of contracts CoreWeave has accumulated. As of the end of the third quarter, CoreWeave had a backlog of $55.6 billion in customer contracts.
But interest on its debt is a huge drag on its profits, and the economics of building and renting data centers isn't quite panning out just yet. Interest expense totaled $841.4 million through the first nine months of 2025, roughly quadruple the amount from the same period in 2024. Meanwhile, operating income fell to just $43.6 million through the first nine months of 2025, down from $211.7 million. Even as CoreWeave scales and turns around its operating margin, interest and depreciation will continue to eat into its net income.
There's considerable execution risk for CoreWeave as it takes on more debt. It needs to figure out how to scale its operations profitably, and in the meantime, any slowdown in its buildout can have significant financial repercussions, since it can't rent what it hasn't built. We saw that happen after its third-quarter earnings included a disclosure that a CoreWeave developer experienced delays. We might see it again as the company tries to scale to 5 gigawatts of capacity by 2030.
