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On Tuesday, Morgan Stanley (NYSE:MS) initiated coverage on CoreWeave (NASDAQ:CRWV), a company specializing in the operation of GPU clusters, with an Equalweight rating and a price target of $46.00. The firm’s analyst highlighted CoreWeave’s rapid growth and significant role in the expanding Generative AI (GenAI) market, which is projected to create a $1.1 trillion monetization opportunity and a corresponding $361 billion GPU Economy by 2028. The company’s stock, currently trading at $35.42, has experienced significant volatility, dropping 13% in the past week. According to InvestingPro analysis, CoreWeave appears undervalued based on its Fair Value calculations, despite its impressive revenue growth of over 736% in the last twelve months.
CoreWeave has built a business worth over $25 billion in less than five years, a rate of growth that has been unprecedented in the software industry. With a current market capitalization of $16.4 billion and an impressive gross profit margin of 74.2%, the company has demonstrated strong operational efficiency. This success is attributed to the company’s strong domain expertise in building and maintaining complex server environments, which are essential for powering the GPU economy. Morgan Stanley’s analysis suggests that CoreWeave’s proficiency in this area places it in a competitive position to secure a substantial portion of future business as various entities, including hyperscalers, sovereigns, and enterprises, seek to capitalize on the GenAI opportunity.
Despite the optimistic outlook on CoreWeave’s capabilities and market position, Morgan Stanley also pointed out certain risks associated with the company’s business model. These include a high debt load, which is expected to grow to $32 billion by the end of the calendar year 2026. Current total debt stands at $10.6 billion, with a concerning current ratio of 0.39, indicating potential liquidity challenges. Additionally, there is a significant customer concentration risk, with two customers projected to account for more than 50% of the company’s revenue in 2026. The analyst also noted the increasing level of competition CoreWeave may face, including from some of the hyperscalers that currently contribute to a large portion of its revenue. InvestingPro subscribers have access to 13 additional key insights about CoreWeave’s financial health and growth prospects.
CoreWeave’s expertise in efficiently operating GPU clusters has been a key factor in its ability to scale rapidly and build a substantial book of business. While currently unprofitable with a net loss in the last twelve months, analysts tracked by InvestingPro expect the company to turn profitable this year with projected earnings per share of $1.58. The company’s ability to keep complex server environments running effectively is a critical advantage in the competitive GenAI market.
The Morgan Stanley report underscores the dual nature of CoreWeave’s position in the market: on one hand, there is a clear opportunity for growth and expansion within the burgeoning GenAI space; on the other, there are material risks that come with such a rapid scale of operations, including debt and customer dependency. CoreWeave’s future performance in the market will likely be influenced by how it navigates these opportunities and challenges.
In other recent news, CoreWeave has been the focus of significant developments. The company recently reduced the size of its US initial public offering to approximately $1.5 billion, adjusting the terms to offer around 37.5 million shares at $40 each, down from the original plan of 49 million shares priced between $47 and $55. Reports have surfaced that Google (NASDAQ:GOOGL) is in advanced talks to lease Nvidia (NASDAQ:NVDA) AI chips from CoreWeave, highlighting the demand for AI compute resources. This potential agreement underscores CoreWeave’s strategic position in the AI infrastructure market.
Analyst firms have initiated coverage on CoreWeave, with both Stifel and Jefferies issuing Buy ratings. Stifel set a price target of $55, emphasizing the company’s expanding market share in AI compute infrastructure, while Jefferies set a $51 target, citing CoreWeave’s ability to scale AI compute resources reliably. Stifel analysts are optimistic about CoreWeave’s financial progress, expecting positive free cash flow within five years. Jefferies also highlighted the company’s favorable position in the burgeoning AI compute market. These developments reflect the growing interest and confidence in CoreWeave’s market prospects.
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