CoreWeave (CRWV +3.13%), a provider of cloud-based AI infrastructure services, went public last March at $40 per share. Today, it trades at nearly $100. Let's see why this stock skyrocketed, and where it might head over the next 12 months.
Why did CoreWeave impress the bulls?
CoreWeave was originally an Ethereum (ETH +5.46%) mining company, but it abandoned that business model after the 2018 cryptocurrency crash. It subsequently repurposed those GPUs to run AI tasks remotely. In 2022, it spent $100 million on Nvidia's (NVDA 0.68%) H100 data center GPUs to support that expansion. It also leveraged those GPUs as collateral to secure additional financing to purchase even more GPUs and open new data centers.
Image source: Getty Images.
CoreWeave operated only three data centers at the end of 2022, but now operates 33 centers across the U.S. and Europe. It claims its dedicated GPUs enable it to process AI tasks roughly 35 times faster and 80% cheaper than larger and more diversified cloud platforms like Amazon (AMZN 0.74%) Web Services (AWS) and Microsoft (MSFT 1.01%) Azure.
As the AI market expanded, CoreWeave's revenue skyrocketed from $16 million in 2022 to $1.9 billion in 2024, and analysts expect that figure to surge to $5.1 billion in 2025.
NASDAQ: CRWV
Key Data Points
From 2025 to 2027, they expect its revenue to nearly quadruple to $19.5 billion, with profitability by the final year. That growth should be driven by its massive AI infrastructure deals with Microsoft, OpenAI, and other AI software giants. As it scales up its business, its gross margins should gradually expand as its operating expenses decline.
Where could its stock head over the next 12 months?
With a market cap of $46.9 billion, CoreWeave trades at less than four times this year's sales. However, three potential headwinds are likely compressing its valuations.
First, it still generates roughly 70% of its revenue from Microsoft. Second, it will likely take on more debt and issue more shares to fund its aggressive expansion. Lastly, its failed attempt to acquire Core Scientific (CORZ +2.59%) for $9 billion last year indicates it could pursue more aggressive, dilutive acquisitions to expand its ecosystem. In other words, CoreWeave still hasn't proven its capital-intensive business model is sustainable yet.
If CoreWeave matches analysts' near-term expectations and trades at a slightly more generous five times sales, its market cap could more than double to $98 billion by the beginning of 2027. That would be an impressive 12-month gain, but tougher competition, higher-than-expected costs, or a broader slowdown in AI spending could still weigh down its stock.
