CoreWeave: Is Nvidia’s Golden Child Now Overpriced?

Published 03/06/2025, 19:40
Updated 03/06/2025, 19:44

Since going public at the end of March, CoreWeave stock is up 201%, having started its stock price journey at $40 per share, now priced at $138.51. The cloud service provider is tightly interwoven into Nvidia’s accelerated GPU offering for AI workloads, having been designated as an Elite Cloud Services Provider (CSP) within the Nvidia Partner Network.

It is then understandable why CoreWeave’s public trading debut turned out so successful. NVIDIA Corporation (NASDAQ:NVDA) is the prime beneficiary of the AI boom, which needs AI infrastructure. CoreWeave has access to Nvidia’s latest AI chips, which CoreWeave harnesses for its clients on a pay-per-use basis.

In addition to forming a symbiotic relationship with CoreWeave, Nvidia invested $100 million in the company before its IPO in April 2023. By the time of CoreWeave’s IPO prospectus, Nvidia owned 17.9 million CRWV shares. This increased to 24.2 million shares by mid-May.

In short, Nvidia cleverly embedded itself in the entire AI value chain, making major unrealized gains through CoreWeave exposure. But should investors do the same at CRWV’s current price point?

CoreWeave’s Role: Intercepting Hyperscalers’ Dominance

Since the beginning of the AI hype, after ChatGPT’s public debut in late 2022, the valuation of AI-related stocks revolved around hardware compute demand. If potentially everything can be AI-dified, then the ceiling for AI demand only stops at the electricity needed for workloads.

In turn, this pushed the valuation of utilities stocks, and especially nuclear stocks like Constellation Energy (NASDAQ:CEG). The Big Three hyperscalers – Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) – keep investing the most in AI as the obvious tech backbone of US hegemonic influence.

And as Nvidia provided the ready-to-go full AI stack, this concentration was the main reason why Nvidia became a $3.3 trillion company. However, it is also the case that hyperscalers are making their own AI chips.

Case in point, Alphabet is set to upset the cart with Ironwood, purportedly the “most powerful, capable and energy efficient TPU yet”. Likewise, Amazon is developing Trainium and Inferentia chips to scale up AI infrastructure on the company’s own terms.

Consequently, although Nvidia benefited greatly from Big Tech investments, the company is also facing them as core competitors in the long run. This is why CoreWeave has become so important for Nvidia even before its IPO, as a financial wheel:

Nvidia’s cutting-edge chips create demand for CoreWeave.
CoreWeave’s success gives Nvidia both revenue and capital gains through prior stake.

CoreWeave’s Expansion Plans and Performance

Mid-May, CoreWeave delivered its Q1 2025 earnings ending March. The company reported a 420% year-over-year revenue boost to $981.6 million. However, it is clear its business model is still in rapid expansion phase, as net losses increased by 143% to $314.6 million.

In addition to $177 million IPO-related stock-compensation costs, much of that loss comes from ongoing scaling operations. Therefore, despite the lack of profitability, expectations are now more important. And CoreWeave exceeded revenue consensus by nearly 15%.

The company is also bullish for its FY2025 revenue, having raised guidance above the consensus, to $4.9 – $5.1 billion range. To facilitate its server expansion with accelerated GPU chips, the company has $1.27 billion in cash at disposal, against current liabilities worth $1.24 billion.

CoreWeave raised its total debt to $17.2 billion. Given the reported revenue backlog of $25.9 billion, this indebted business model seems sustainable. Furthermore, the strategic deal with OpenAI, signed in early March, still has a backlog of $11.2 billion.

Integrating Nvidia’s GB200 Grace Blackwell chips, CoreWeave is hosting around 1.6 GW worth of total capacity for contracted computing power, of which 420 MW is currently harnessed. For comparison, after President Trump led the PPP push in Saudi Arabia, the Kingdom (TADAWUL:4280) should scale up to 1.5 GW of AI data center power by 2028.

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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.

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