In the fast-paced world of AI infrastructure, CoreWeave (NASDAQ:CRWV) is proving doubters wrong once more. Shares are jumping 5% in morning trading today, approaching $120 per share, fueled by blockbuster news of a $6.3 billion deal with Nvidia (NASDAQ:NVDA | NVDA Price Prediction).
The agreement, signed under their existing master services pact, commits the chip giant to snapping up any unsold cloud capacity from CoreWeave through April 2032. This backstop ensures steady revenue amid soaring AI demand, highlighting CoreWeave’s pivotal role in powering next-gen computing.
The surge marks a 42% rebound from August’s low of around $84 per share, a dip that followed a meteoric post-IPO run. CoreWeave went public in March at a valuation exceeding $35 billion, riding the AI wave with explosive growth — first-quarter revenue soared 420% year-over-year to $981.6 million.
Backed by Nvidia’s stake of 24.3 million shares worth nearly $4 billion, the company has inked massive pacts with OpenAI ($11.9 billion) and Microsoft (NASDAQ:MSFT). Yet, volatility hit in August amid broader market jitters and short-seller scrutiny. Now, with this Nvidia lifeline, CRWV is roaring back. Have the critics who bet against CoreWeave gotten it all wrong?
A Question of Longevity
Jim Chanos, the legendary short-seller famed for torching Enron, took to X in August to blast CoreWeave for purportedly wildly overestimating the useful lives of its Nvidia GPUs. Chanos, who runs Kynikos Associates, warned that accelerated depreciation could gut profitability. “CoreWeave’s accounting smells like dot-com era overoptimism,” he posted, echoing fears of an AI bubble. His commentary amplified bearish sentiment, which helped contribute to the stock’s August pullback as investors fretted over hidden costs in the GPU-heavy business.
While Chanos hasn’t publicly disclosed he’s shorted the stock, his analysis resonates with other CRWV bears who question the sustainability of hyperscaler deals. Nvidia’s commitment today seems to mock those doubts — it guarantees capacity take-up and bolsters CoreWeave’s balance sheets. Have the skeptics, including Chanos, truly missed the mark?
Do the Criticisms Hold Water?
CoreWeave’s critics, like Chanos, aren’t entirely off-base. The core gripe: GPUs depreciate rapidly in the AI arms race. Newer chips like Nvidia’s Blackwell outpace older Hopper models, potentially leaving CoreWeave with obsolete inventory.
Chanos highlighted how management assumes multi-year lifespans, but if AI training shifts to fresher tech, write-downs could balloon. Add in sky-high capital expenditures — CoreWeave plans to spend $20 billion to $23 billion or 2025 on data centers — and profitability remains elusive.
Net losses widened to $863 million in 2024 despite revenue tripling, raising red flags on debt-fueled expansion. Bears also point to reliance on a few whales like Microsoft and OpenAI: if AI hype cools, demand could falter.
Yet, merit doesn’t equate to doom. CoreWeave’s specialized GPU cloud thrives in an insatiable AI market. Its revenue backlog hit $30 billion in Q2. The Nvidia deal also directly counters idle capacity risks, while recontracting older GPUs for inference workloads extends their value.
Management counters that flexible depreciation models align with real usage, not rigid timelines. Trading at 16 times sales, CRWV seems extremely overvalued — though it’s much more reasonable than other Nvidia-backed rivals like Nebius (NASDAQ:NBIS) at 88x or even Nvidia itself at 26x.
Yet, AI tailwinds suggest the growth anticipated justifies the hype. Critics have merit on risks, but the Nvidia pact and market momentum tilt toward bulls.
Key Takeaway
CoreWeave remains a compelling buy for risk-tolerant investors eyeing AI’s explosive trajectory. The $6.3 billion Nvidia backstop de-risks operations, underscoring unbreakable demand. At around $120 per share, shares trade below analyst highs of $180, with robust backlog signaling multi-year upside.
Sure, GPU obsolescence and capex issues loom, but CoreWeave’s Nvidia ties and niche dominance position it as an AI infrastructure leader. Bears like Chanos got the short-term dip right, but long-term, they’ve underestimated the boom. CRWV stock remains a buy before the next surge higher.
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