One of the most anticipated artificial intelligence (AI) initial public offerings of the last year was CoreWeave (CRWV 2.56%). While investors initially cheered on the data center services provider following its March 2025 debut, shares have been under immense selling pressure over the last several months.
A combination of AI bubble fears, the high amount of debt on the company's balance sheet, and potentially a misunderstanding of CoreWeave's value proposition drove the shares downward by as much as 52% since the beginning of November. While the stock has rebounded somewhat from its recent low, shares are still trending downward since late January. Let's dig into some of CoreWeave's advantages and assess if now is a good opportunity for smart investors to buy the dip.
NASDAQ: CRWV
Key Data Points
The neocloud advantage: How CoreWeave is disrupting hyperscalers
Over the last three years, hyperscalers such as Amazon Web Services, Microsoft Azure, and Google Cloud Platform have shelled out hundreds of billions of dollars in capital expenditures to procure high-powered AI chips and servers, and to construct massive data centers to house this hardware. One of the biggest catalysts behind big tech's rising infrastructure spending is its need to provide AI processing power to its customers.
While the AI trend has undoubtedly ushered in a new growth arc for cloud service providers, accelerated capex levels and lengthy data center buildouts have been making Wall Street uneasy as of late. In some ways, these dynamics can benefit CoreWeave.
CoreWeave is a neocloud company: Essentially, its business model is to procure GPUs from Nvidia and rent access to this hardware via a cloud-based platform. The value proposition of this approach is that it provides a fast, cost-efficient way for developers to access best-in-class AI ecosystems without the expenses of designing, building, and operating their own data centers.
Image source: Getty Images.
How Nvidia and OpenAI de-risk CoreWeave
Nvidia is more than just a chip supplier to CoreWeave. The GPU designer is actually a major investor in the neocloud company, and recently doubled its stake in it, buying an additional $2 billion worth of its shares.
As of the end of the third quarter, CoreWeave boasted a backlog of $55.6 billion -- up 271% year over year. According to management, commitments from OpenAI represent up to 40% of that total. Meanwhile, Meta Platforms inked a multiyear, $14 billion deal of its own with CoreWeave a few months ago.
In my view, CoreWeave's ability to attract top-tier hyperscalers as customers while maintaining a strategic relationship with the king of AI chips, Nvidia, makes the company's investment profile significantly less risky compared to smaller peers like Nebius Group or Iren.
Is CoreWeave stock undervalued?
The perceived drawback for CoreWeave as an investment is its valuation relative to its financial profile. It is not yet consistently profitable, and it carries nearly $19 billion worth of debt and operating leases on its balance sheet.
CRWV PS Ratio data by YCharts.
Against this backdrop, a price-to-sales (P/S) ratio of 9 is far from a cheap valuation for an unprofitable, capital-intensive business with a high customer concentration.
Nevertheless, I think CoreWeave could still be a savvy buy right now for the right investors. Shares have normalized considerably over the last several months. Moreover, the AI infrastructure supercycle is only just beginning. CoreWeave looks well positioned to ride some strong secular tailwinds over the next several years.
Investors looking to complement their existing AI positions with emerging opportunities may want to consider CoreWeave stock at its current levels and prepare to hold on for the long run.
