Hello, my friends. Have you been feeling too sane lately? Have I got something for you! It is a company called CoreWeave.
You may not have heard of it because it’s not doing the consumer-facing part of AI. It’s a data center company, the kind people talk about when they say they want to invest in the “picks and shovels” of the AI gold rush. At first glance, it looks impressive: it’s selling compute, the hottest resource in the industry; it’s landed a bunch of big-name customers such as Microsoft, OpenAI and Meta; and its revenue is huge — $1.4 billion in the third quarter this year, double what it was in the third quarter of 2024. The company has almost doubled in share price since its IPO earlier this year, which was the biggest in tech since 2021. So much money!
But as I began to look more closely at the company, I began feeling like I’d accidentally stumbled on an eldritch horror. CoreWeave is saddled with massive debt and, except in the absolute best-case scenario of fast AI adoption, has no obvious path toward profitability. There are some eyebrow-raising accounting choices. And then, naturally, there are the huge insider sales of CoreWeave stock.
I realized CoreWeave did make a horrible kind of sense: It’s a tool to hedge other companies’ risks and juice their profits
After I unfocused my eyes a little, I realized CoreWeave did make a horrible kind of sense: It’s a tool to hedge other companies’ risks and juice their profits. It’s taking on the risk and the costs of building data centers that bigger tech companies can then rent while they build their own data centers which may very well wind up competing with CoreWeave. What’s more, it’s part of a whole stable of companies that are propping up demand for the behemoth of the AI boom: Nvidia.
I don’t think CoreWeave’s weaknesses are a secret. It just seems like a lot of investors are ignoring them. Whether that’s because of AI fomo or a sophisticated game of chicken — getting as much money from CoreWeave shares before the inevitable collapse as possible — I can’t really say. I just know that after spending several days parsing its financials, talking to analysts and other experts, and trying to understand AI infrastructure, here’s my life now:
CoreWeave went public in March, at a share price of $40, and at its peak this year was worth $187 a share. That was back in June. Today, the shares opened at $75.51. Some of the price decline is due to CoreWeave announcing, along with its third quarter earnings, that delays on a data center mean it’ll make less money this year. The delay underscored some of the difficulties CoreWeave faces in becoming a profitable business.
CoreWeave is “the poster child of the AI infrastructure bubble,” wrote Kerrisdale Capital, an investment manager, in a September note announcing it was shorting the stock. “Strip away the noise, and CoreWeave remains an undifferentiated, heavily levered GPU rental scheme stitched together by timing and financial engineering, not lasting innovation.” Kerrisdale thinks the fair value stock price of CoreWeave is $10.
CoreWeave, of course, does not agree with this assessment. “CoreWeave is the essential cloud for AI, a software solution, built on cutting-edge physical infrastructure and designed from the ground up to provide the most effective and efficient super computers to those whose workloads demand the most computing power,” said Lia Davis, CoreWeave’s head of global communications, in a written statement. “We are seeing strong support from existing customers, who continue to extend and expand their agreements with us.”
All right. Time for the rabbit hole.
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