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Investing.com - Needham downgraded CoreWeave (NASDAQ:CRWV) from Buy to Hold on Thursday, citing valuation concerns despite the strategic benefits of the company’s announced CORZ acquisition. The company, currently valued at $73.46 billion, has seen its stock surge 282.62% over the past six months. According to InvestingPro analysis, the stock appears to be trading above its Fair Value.
The research firm believes the CORZ acquisition is a strategic fit for CoreWeave and would unlock an estimated 150-200MW of additional IT capacity for HPC/AI workloads. These sites would likely require higher capital expenditure than existing retrofits, potentially costing $9-10 million per MW versus the prior guidance of $5-8 million per MW for the previous 590MW with CORZ. InvestingPro data shows the company is currently operating at a loss, with a diluted EPS of -$5.19 over the last twelve months.
Needham highlighted several benefits of the transaction, including CoreWeave’s ability to own high-quality underlying infrastructure that can support inference workloads, lower its cost of capital through data center-backed ABS financing, save $500 million annually on operating expenses, and bring data center operations teams in-house.
The firm updated its 2026 and 2027 estimates to reflect adjustments related to the transaction. Despite the strategic benefits, Needham cited CoreWeave’s current valuation of 41 times its 2026 EBIT estimate as the primary reason for the downgrade.
Needham analyst Mike Cikos stated, "We believe valuation is full," prompting the downgrade to Hold despite the positive aspects of the CORZ acquisition.
In other recent news, CoreWeave announced its acquisition of Core Scientific in a transaction valued at approximately $9 billion. This all-stock deal is expected to bring significant cost savings, with the elimination of $10 billion in lease overhead over 12 years and projected annual run rate savings of $500 million by the end of 2027. The acquisition will expand CoreWeave’s data center footprint, giving it control of approximately 1.3 gigawatts of gross power. Analysts have responded to the acquisition with mixed ratings: Mizuho (NYSE:MFG) downgraded CoreWeave from Outperform to Neutral, raising the price target to $150, citing a balanced risk/reward profile despite the deal’s potential benefits. Stifel also downgraded the stock from Buy to Hold, while increasing the price target to $115, acknowledging potential value creation but expressing concerns over short-term integration challenges. Macquarie maintained a Neutral rating with a $65 price target, highlighting projected net annual savings and potential earnings accretion from the deal. Additionally, CoreWeave has become the first cloud provider to offer NVIDIA (NASDAQ:NVDA) RTX PRO 6000 instances, boasting faster AI and graphics performance. The company continues to expand its NVIDIA infrastructure offerings, reinforcing its position in the AI and graphics technology sector.
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