3 Reasons to Sell CoreWeave Stock Before It's Too late

Core Insights - The article discusses the potential weaknesses of CoreWeave, a company in the AI infrastructure ecosystem, suggesting it may be time to consider selling its stock [2][9]. Operational Weakness - CoreWeave, originally founded as Atlantic Crypto in 2017, transitioned from cryptocurrency mining to cloud computing, renting out hardware for AI model training [3]. - The company claims its services are 35% faster and 80% cheaper than generalized public clouds, but operational results indicate possible underlying issues [4]. - Despite a 134% year-over-year revenue increase to $1.36 billion, operating margins plummeted from 20% to 4%, indicating a focus on growth at unsustainable pricing levels [5]. Valuation Concerns - CoreWeave's price-to-sales (P/S) ratio stands at 8.3, which seems reasonable compared to its growth rate, but its operating income fell to $52.8 million, raising concerns about profitability [6]. - The valuation appears inflated when compared to the S&P 500 average P/S of 3.3, suggesting a potential 60% reduction in valuation [7]. - The company has $10.3 billion in non-current debt against only $1.9 billion in cash, indicating over-leverage and significant cash flow strain due to $310.6 million in interest expenses in Q3 [8]. Speculative Nature of Generative AI - The future demand for AI infrastructure is uncertain, relying on the assumption of continuous growth in AI technology [9]. - Progress in generative AI models is reportedly slowing, raising doubts about justifying the high hardware and energy costs associated with the technology [10].