After a Massive 207.5% Run-Up, Is This AI Stock Still a Buy?
Finding great stocks with the potential to deliver sustained growth over the long haul is no easy feat. CoreWeave (CRWV), a rapidly developing cloud infrastructure provider, not only stands out now, but also has the fundamentals and momentum to reward patient investors in the long run.
CoreWeave stock has gained a massive 207.5% since it started trading following its IPO in March. Nonetheless, the company’s recent Q2 performance suggests it has a durable runway for growth for investors willing to accept the risks.
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Valued at $60.3 billion, CoreWeave is a cloud computing company that is driving the artificial intelligence (AI) revolution using specialized GPU computing at scale. CoreWeave also supports workloads such as 3D rendering, VFX creation, and scientific simulations, which require massive computational power.
CoreWeave delivered a standout second quarter as it progresses rapidly as one of the world’s fastest-growing AI cloud providers. In the second quarter, revenue rose a whopping 207% year-over-year to $1.2 billion alongside $200 million in adjusted operating income. Q2 marked the first time the company achieved both the $1 billion revenue and $200 million profit marks in a single quarter. This reflects the scale and speed of CoreWeave’s execution amid what CEO Michael Intrator described as an “unprecedented demand for AI cloud services.”
Customers are gradually migrating petabytes of core storage to CoreWeave via multiyear contracts. This resulted in a contract backlog of $30.1 billion, up 86% year over year and double year-to-date, thanks to a mix of new enterprise customers, startups, and hyperscale partnerships. Notably, the backlog includes a $4 billion expansion with OpenAI and new contracts in various industries.
CoreWeave’s diverse customer base continues to grow at an incredible rate. Its VFX cloud offering, Conductor, has seen a fourfold increase in usage year-to-date, while its AI infrastructure now serves everything from video generation startups to healthcare to large financial institutions such as Jane Street, Morgan Stanley, and Goldman Sachs.
CoreWeave’s competitive advantage is its purpose-built, high-performance AI cloud infrastructure, which is optimized for training and inference workloads alike. The company’s Mission Control system, which is a completely automated, observability-driven platform for managing enormous AI clusters, has formed the foundation of its operations. Management stated that in Q2, CoreWeave implemented Nvidia’s (NVDA) GB200 NVL72 and HGX B200 systems at scale, which were linked into Mission Control for real-time reliability and performance monitoring.
The company’s recent acquisition of Weights & Biases has strengthened its end-to-end AI observability suite. Furthermore, the proposed acquisition of Core Scientific (CORZ) marks a significant step toward full vertical integration. The combined company would hold 1.3 gigawatts of gross power capacity, with an additional 1 gigawatt available for future expansion, firmly establishing itself as one of the world’s largest and most powerful AI cloud platforms.
According to management, CoreWeave had $2.1 billion in cash and equivalents at the end of the second quarter and no substantial debt maturities until 2028, giving a healthy financial runway for sustained growth.
A large share of early revenue reportedly came from a handful of big customers such as Nvidia and OpenAI. When a small number of clients account for a large portion of revenue, losing or renegotiating one of those contracts can have a significant impact on results.
Secondly, rapid growth in revenue does not guarantee eventual high profits. The company has reported sizable losses while investing to capture market share. Adjusted net loss stood at nearly $131 million in the quarter compared to a $5 million adjusted net loss in Q2 2024. Investors must decide whether they trust management to translate huge sales and backlog into long-term profitability.
Third, CoreWeave is making significant investments in its data center footprint, including a $6 billion facility in Lancaster, Pennsylvania, and a joint venture project with Blue Owl in Kenilworth, New Jersey. As management anticipates, these projects will provide both large-scale training capacity and low-latency inference compute, thereby supporting an increasingly scattered U.S. cloud network. Heavy investments without steady profitability may stress the balance sheet in the long run.
Overall, analysts have rated CoreWeave stock a “Moderate Buy.” Out of 27 analysts covering the stock, 13 have a “Strong Buy” rating, one suggests a “Moderate Buy,” 12 rate it a “Hold,” and one says it is a “Strong Sell.” The stock has an average target price of $141.84, indicating 11% expected upside from current levels. Plus, its high target price of $200 implies the stock could rally 60% over the next 12 months.
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Investors looking to buy CoreWeave stock after the run-up might want to consider their investment horizon first. CoreWeave is a long-term growth story so therefore, volatility is unavoidable. For patient investors willing to wait five years or longer, the company’s backlog and AI compute demand might be worth riding through volatility. However, risk-averse investors may want to avoid this high-risk, high-reward AI stock.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
