Since artificial intelligence (AI) caught the attention of the market beginning in November 2022, Nvidia (NVDA 0.34%) has set the bar for blockbuster growth among AI-associated stocks. The GPU specialist posted five straight quarters of triple-digit revenue growth through fiscal 2024 and 2025, peaking at 265% in the third quarter of fiscal 2024.
The recently IPO’d CoreWeave (CRWV 8.18%) offered the latest reminder of the explosive growth in AI, and its recent revenue jump blew Nvidia’s away. Admittedly, CoreWeave is much smaller than Nvidia, but its revenue soared 737% in 2024 to reach $1.9 billion.
As a cloud infrastructure platform purpose-built for AI, CoreWeave is the first significant initial public offering in this new AI era (the stock went public on Friday, March 28). Let’s take a look at what you should know about CoreWeave before discussing whether it’s a buy.
Image source: Getty Images.
CoreWeave: A new opportunity in AI
CoreWeave’s path to becoming an AI cloud computing platform isn’t what you’d expect. The company was originally founded in 2017 by three entrepreneurs with a history of trading carbon credits as The Atlantic Crypto Corp., focused on mining Ethereum during the crypto boom back then. By 2019, the company had changed its name to CoreWeave as it pivoted to become a data center business, leveraging the power of the GPUs it had initially purchased for Ethereum mining, and then through acquiring distressed hardware companies during the “crypto winter” of 2018 and 2019.
The company began using its computing infrastructure to render videos or training AI models for customers. In 2020, it started to evolve into the cloud platform it is today when it began renting Nvidia GPUs in the cloud to its customers. From there, CoreWeave attracted customers, as its service was faster than traditional platforms, making it ideal for AI applications. Its revenue has jumped roughly 119x in the last two years, from $16 million in 2022 to $1.9 billion in 2024. Along the way, Nvidia and OpenAI have become investors.
The company sees its competitive advantage as being purpose-built for AI, while traditional cloud platforms are “built to host websites, databases, and SaaS apps, which have fundamentally different needs than the high-performance requirements of AI,” as CoreWeave says in its prospectus.
High growth, high risk
CoreWeave’s soaring growth is no doubt impressive, but it’s not as safe as it might seem. Customer concentration is a big risk for the company. In 2024, 62% of its revenue came from Microsoft (MSFT 0.13%), and 15% came from its second-biggest customer.
However, there are signs Microsoft’s demand for its computing infrastructure is slowing. In March, Microsoft chose to not exercise an option to buy nearly $12 billion more worth of data center capacity from CoreWeave, which some interpreted as a sign that demand for AI computing, including from CoreWeave, was slowing.
CoreWeave said in its prospectus that it is diversifying away from Microsoft, noting that the Windows maker will represent less than 50% of expected future committed contract revenues due to the $11.55 billion in future revenue it expects from OpenAI as part of its master services agreement. It also said its remaining performance obligations (RPO) rose 53% last year, a sign that its backlog of business is growing robustly, a good sign for continuing revenue growth.
Microsoft, whose share of CoreWeave’s revenue went from 35% in 2023 to 62% in 2024, is driving most of the revenue growth at the moment. But CoreWeave is also seeing surging demand from other customers, as the OpenAI deal shows.
Still, the news about Microsoft seems to have spooked investors, as last week’s IPO was undersubscribed and priced under the company’s target range. Additionally, the stock closed flat in its opening day, and declined 7% on its second trading day, a clear sign that it was not an auspicious beginning for the AI stock (it has since recovered those losses).
Is CoreWeave a buy?
CoreWeave is a high-risk stock at this stage. IPO stocks are typically high-risk, as it takes a while for them to find equilibrium in the stock market.
However, given its pure-play exposure to AI, high growth, and customer concentration, CoreWeave is especially risky, and even more so at this stage of the market cycle, as the Nasdaq Composite (^IXIC 0.82%) is trading in correction territory.
Despite the concerns about the relationship with Microsoft, the fundamentals and valuation of the business look solid, as it trades at a price-to-sales ratio of less than 7. It reported a generally accepted accounting principles (GAAP) operating profit of $324.4 million on $1.9 billion in revenue, though it is still unprofitable on an adjusted basis from the $7 billion in debt it holds and the resulting interest expense.
CoreWeave’s IPO struggles seem to be more a reflection of investor sentiment around tariffs and other issues than the business itself. Given the direct exposure to AI in its business model, CoreWeave should do well over the long term if investment in AI infrastructure continues to grow.
While the stock is likely to be volatile over the next few months at least, the long-term opportunity for CoreWeave looks considerable. Therefore, for patient, long-term investors, getting at least a little bit of exposure here makes sense.
