56 Billion Reasons to Buy CoreWeave's Stock (and 1 Reason to Avoid It)

Core Viewpoint - CoreWeave is becoming a critical player in the AI infrastructure sector, focusing on providing clients with access to top-tier AI computing hardware, leading to significant growth potential [1][3] Company Growth - CoreWeave has established contracts with major clients like Microsoft and Meta Platforms, which are utilizing its services to enhance their data center capabilities [3] - The company reported a revenue of $4.3 billion over the past 12 months, reflecting a 133% year-over-year increase, and has a substantial revenue backlog of $56 billion from signed performance obligations [4][6] - Approximately 40% of the backlog, or $22 billion, is expected to be recognized within the next 24 months, indicating a potential doubling of revenue in that timeframe [6] Financial Metrics - CoreWeave's current market capitalization stands at $36 billion, with a gross margin of 49.23% [5][6] - The company experienced a free cash flow outflow of $8 billion in Q3, indicating widening losses [9][11] Profitability Concerns - The primary concern for investors is CoreWeave's lack of profitability, as the lifespan of GPUs in data centers is limited, necessitating positive cash flows to avoid funding losses [8][12] - There is a risk that AI hyperscaler customers may only use CoreWeave as a temporary solution until they can build their own data centers, which could jeopardize CoreWeave's long-term viability [7][12]