Since artificial intelligence (AI) gained market attention in November 2022, Nvidia (NVDA) has emerged as a leader in growth among AI-related stocks. The company, known for its graphics processing units (GPUs), experienced five consecutive quarters of triple-digit revenue growth through fiscal years 2024 and 2025, reaching a peak of 265% in the third quarter of fiscal 2024.
CoreWeave (CRWV), a recently public company, has highlighted the rapid expansion in AI. Although considerably smaller than Nvidia, CoreWeave’s revenue surged by 737% in 2024, hitting $1.9 billion. As an AI-focused cloud infrastructure platform, CoreWeave represents a significant initial public offering in the current AI boom, having gone public on Friday, March 28.
CoreWeave’s evolution into an AI cloud computing platform is unique. The company was founded in 2017 by three entrepreneurs under the name The Atlantic Crypto Corp., initially focusing on Ethereum mining during the cryptocurrency boom. By 2019, the company rebranded as CoreWeave and shifted focus to become a data center business, utilizing GPUs originally purchased for Ethereum mining and acquiring hardware from distressed companies during the cryptocurrency market downturn in 2018 and 2019.
CoreWeave leveraged its computing infrastructure to provide services like video rendering and AI model training. In 2020, it began renting Nvidia GPUs in the cloud, attracting customers due to its faster service compared to traditional platforms, making it well-suited for AI applications. Over two years, its revenue increased significantly from $16 million in 2022 to $1.9 billion in 2024. Nvidia and OpenAI have since become investors in CoreWeave.
CoreWeave distinguishes itself by being specifically designed for AI applications, contrasting traditional cloud platforms that are tailored for hosting websites, databases, and SaaS applications, which fundamentally differ in requirements from AI’s high-performance needs.
Despite its remarkable growth, CoreWeave faces significant risks. A major concern is the concentration of its revenue, with 62% of it coming from Microsoft (MSFT) in 2024, and 15% from another key customer. There are indications of a slowdown in Microsoft’s demand for CoreWeave’s computing infrastructure, evidenced by Microsoft’s decision not to exercise an option to purchase nearly $12 billion more in data center capacity from CoreWeave.
CoreWeave is actively diversifying its customer base away from Microsoft, citing that less than 50% of its future committed contract revenues will be from Microsoft, thanks to an expected $11.55 billion in revenue from OpenAI under a master services agreement. Its remaining performance obligations also increased by 53% last year, indicating a robust business backlog expected to contribute to future revenue growth.
Microsoft’s increasing share of CoreWeave’s revenue, rising from 35% in 2023 to 62% in 2024, drives much of the company’s current revenue growth. However, demand from other clients, highlighted by the OpenAI deal, is also on the rise.
Despite the positive growth indicators, concerns about Microsoft affected investor sentiment, resulting in an undersubscribed IPO priced below the company’s target range. The stock saw a decline on its second trading day, although it later recovered those losses.
CoreWeave is a high-risk investment at present. Newly public stocks are inherently risky, as it takes time for them to stabilize in the market. CoreWeave carries additional risks due to its concentrated exposure to AI, elevated growth, and current market cycle conditions, with the Nasdaq Composite (^IXIC) experiencing a correction phase.
Notwithstanding apprehensions about Microsoft, CoreWeave’s fundamentals and valuation look promising, with a price-to-sales ratio of under 7. The company reported a GAAP operating profit of $324.4 million on $1.9 billion in revenue, although it is still not profitable on an adjusted basis due to its $7 billion in debt and associated interest expenses.
The challenges faced by CoreWeave’s IPO appear more linked to broader investor concerns rather than the company’s business model. Given its dedicated focus on AI, CoreWeave is positioned to benefit if AI infrastructure investments continue to rise.
While the stock may be volatile in the short term, CoreWeave presents substantial long-term potential for patient investors. Thus, considering a modest investment could be prudent for those looking to capitalize on the growth trajectory of AI infrastructure.
