Dream Weaver

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Hi everyone,

Welcome back to your next edition of GRIT Alpha. Today we’ll be breaking down one of the most talked-about stocks of 2025.

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Stock Pick: CoreWeave (CRWV-US, $23B MCAP)

Alright, I’m doing it.

In the midst of one of the most volatile markets we’ve seen since World War II, I’m going to pick the most hotly debated stock in the entire market right now. This breakdown is going to come with a caveat, but in learning about this stock, we can also gain further insight on the most important secular theme of our generation.

As Trump rattles global supply chains and reverses decades of globalization, the markets have been shaken to their core. In three days, we erased $10T from the MSCI in global equity value.

For those of you who attended GRIT Money Summit - you know what was said about situations like these: Never waste a good crisis.

When the market is in 100% panic mode, stocks decouple from their fundamentals as animal spirits fully take hold. If this company makes it through a cash crunch, it’s stock could be one of the best medium-term plays after a big pullback.

Do the work now on your favorite ideas so that you can pull the trigger when they get crushed.

• Why now? 👉 A Time To Build

• Overview 👉 What Does Coreweave Do?

• Product Suite 👉 CoreWeave’s Offerings

• How Do They Make Money? 👉 Revenue Model

• Strategic Partnerships 👉 Nvidia, Microsoft, Google, Core Scientific

• By The Numbers 👉 Key Metrics

• Risks 👉 Potential Pitfalls

Why now? 👉 A Time To Build

The AI revolution has ignited an unprecedented land grab for compute power. High-end NVIDIA GPUs have become the most sought-after resource in tech, needed to train and run large AI models. This demand far outstrips supply, creating a moment of opportunity for specialized providers.

Enter CoreWeave, a young company seizing the moment by rapidly building out capacity. In March 2025, CoreWeave filed its S-1 to go public, marking the first major AI-driven IPO and a break in the tech IPO drought​. They couldn’t have done it at a crazier time...

CoreWeave is racing to build data centers and deliver AI compute while the iron is hot. This aggressive expansion is fueled by the belief that whoever provides AI horsepower fastest will lock in long-term clients during this gold rush. CoreWeave’s S-1 emphasizes that AI needs “a purpose-built AI cloud platform... delivered in an efficient, automated, and highly performant way”​ – a mission it is rushing to execute in real time.

The result: a lightning-fast scale-up of capacity (from essentially a crypto mining pivot in 2022 to a top AI cloud contender by 2024) and an attempt to raise billions in new funding via IPO to keep the build-out going. In short, CoreWeave is striking while the iron is hot, aiming to capitalize on today’s GPU shortage and insatiable AI demand to establish itself as the go-to AI infrastructure provider.

Overview 👉 What Does Coreweave Do?

CoreWeave is essentially a supercharged cloud provider built exclusively for AI workloads. If Amazon Web Services is a general-purpose “everything cloud,” CoreWeave is a specialist – laser-focused on renting out powerful GPU-based computing to train and run AI models.

In practical terms, CoreWeave buys cutting-edge NVIDIA chips in bulk and offers them to customers as a cloud service. Clients range from tech giants like Microsoft and Meta to AI startups and research labs, all hungry for compute. Think of CoreWeave as an “AI hyperscaler”: its entire cloud is purpose-built for machine learning and high-performance computing, trading breadth of offerings for depth in one niche.

This specialization shows in its origin story. The company began in 2017 as a cryptocurrency miner (then called Atlantic Crypto) run by three ex-hedge fund traders, amassing GPU hardware for Ethereum mining​. After crypto markets cooled – and Ethereum’s 2022 shift to proof-of-stake ended mining rewards – CoreWeave pivoted to AI, repurposing its GPU farms to serve the budding AI boom​.

Today, CoreWeave operates a distributed cloud platform that offers on-demand (or rather, contract-reserved) access to thousands of NVIDIA GPUs across its data centers. Its value proposition is speed and scale for AI: a client can spin up massive GPU clusters on CoreWeave’s cloud – measured in hundreds or even thousands of GPUs – something that would be hard to procure quickly elsewhere.

In effect, CoreWeave provides the raw computing muscle (and supporting software) for those who need to train large neural networks or run complex simulations, without those clients having to build their own data centers. As the S-1 puts it, “we purpose-built our platform to be the infrastructure and application platform for AI”. Unlike a traditional cloud that offers everything from web hosting to databases, CoreWeave’s menu is narrow but high-end: compute power for AI, delivered as a service. This focused model has earned it marquee customers – but also makes it heavily dependent on the continued arms race in AI.

Product Suite 👉 CoreWeave’s Offerings

CoreWeave specializes in AI-focused cloud services, primarily offering GPU compute instances with high-end NVIDIA GPUs (A100, H100, Blackwell chips), rented by GPU-hour for flexibility at scale. Key supporting services include:

• High-Performance Networking: Data centers interconnected via NVIDIA Quantum-2 InfiniBand fabric, ensuring ultra-low latency and up to 3,200 Gbps GPU bandwidth, essential for distributed AI training.

• Managed Kubernetes Service (CKS): A managed, AI-optimized Kubernetes environment enabling developers to deploy AI workloads via containers and HPC tools (e.g., Slurm), simplifying large-scale GPU orchestration.

• Storage & Data Services: Introduced Object Storage with proprietary Local Object Transport Accelerator in late 2024, enabling efficient caching and billing per gigabyte-month, supporting intensive data operations.

• Custom Infrastructure Features: AI-engineered data centers utilize advanced liquid cooling (up to 85% in new GPU servers), supporting power densities of up to 130 kW per rack. Offers bare-metal and private cloud setups for direct hardware access.

CoreWeave operates similarly to a specialized AWS for AI workloads, exclusively using NVIDIA hardware, with over 250,000 GPUs deployed by late 2024, and frequently being first-to-market with the latest NVIDIA chips. Its vertically integrated stack from hardware to Kubernetes provides unmatched AI performance compared to general-purpose clouds.

How Do They Make Money? 👉 Revenue Model

CoreWeave generates revenue primarily through multi-year "take-or-pay" contracts, providing predictable, long-term income by leasing GPU capacity on a GPU-hour basis. Around 96% of revenue comes from these agreements, averaging about four years in length.

Clients reserve GPU capacity and pay regardless of actual usage, creating stable revenue streams compared to traditional cloud providers relying on fluctuating on-demand usage. As of late 2024, CoreWeave had a backlog (Remaining Performance Obligations) of $15.1 billion, up 53% annually, with significant customer prepayments helping fund expansion. Notable large deals include Microsoft's $10 billion commitment through 2030 and NVIDIA's $1.3 billion agreement over four years.

CoreWeave’s strategy focuses on securing major contracts from a few large clients rather than numerous smaller customers, resulting in rapid revenue growth—from $16 million in 2022 to $1.9 billion in 2024. Although requiring substantial upfront hardware investments, the guaranteed revenue allows proactive capacity building. High GPU utilization (70–80%) significantly exceeds typical cloud usage rates, making CoreWeave's infrastructure highly efficient and potentially profitable if costs remain managed.

Strategic Partnerships 👉 Nvidia, Microsoft, Google, Core Scientific

CoreWeave’s growth has been driven by strategic partnerships with Nvidia, Microsoft, Google, Core Scientific, and OpenAI:

• Nvidia: CoreWeave’s primary GPU supplier and significant investor (≈6% equity stake), providing early access to advanced GPUs (H100, Blackwell). Nvidia’s $250 million investment during CoreWeave’s IPO underlines this partnership's strategic importance. The relationship boosts CoreWeave's competitive edge but creates dependence on Nvidia's continued support.

• Microsoft: CoreWeave’s largest client, generating 62% of its 2024 revenue through a $10 billion deal extending through 2028. Microsoft uses CoreWeave’s GPUs primarily to support OpenAI’s models and AI workloads. However, Microsoft is also a potential competitor, actively expanding its own GPU capacity.

• Google: Reportedly in discussions to lease GPU capacity from CoreWeave to supplement its own GPU supply, particularly Nvidia’s Blackwell GPUs. This potential partnership highlights CoreWeave’s strategic positioning as a valuable supplier even to major cloud competitors.

• Core Scientific: Facilitates CoreWeave’s rapid infrastructure expansion by repurposing former crypto-mining sites into AI-optimized data centers. Core Scientific will supply 500 MW of CoreWeave’s future capacity, significantly accelerating infrastructure deployment in multiple locations.

• OpenAI: In March, CoreWeave announced that OpenAI agreed to an $11.9 billion deal to buy services from CoreWeave, which also saw it take an equity stake in the AI cloud provider.

These partnerships position CoreWeave as a crucial player within the AI compute ecosystem, enabling fast growth and scale despite dependence on a few critical partners.

By The Numbers 👉 Key Metrics

CoreWeave’s financials highlight rapid growth coupled with heavy investment and losses:

• Revenue Growth: Revenue surged from $15.8 million (2022) to $1.92 billion (2024), driven primarily by multi-year contracts with key clients like Microsoft. Nearly all (96%) revenue is contracted.

• Losses & Spending: Net losses expanded to $863 million in 2024 (45% of revenue), driven by infrastructure investments, depreciation, and debt interest. Although substantial, losses as a percentage of revenue declined significantly from prior years.

• Backlog: Contracted backlog (Remaining Performance Obligations) reached $15.1 billion by end-2024, providing visibility for future revenues and justifying high valuation metrics.

• Customer Concentration: Revenue heavily reliant on two main clients (Microsoft at ~62%, another major client at ~15%). While contracts are long-term, dependency poses risks if major customers reduce demand.

• Infrastructure Scale: Operating 32 data centers (360 MW active, 1.3 GW contracted), CoreWeave’s GPU infrastructure spans the U.S. and Europe, involving substantial ongoing capital expenditures. High utilization (70–80%) highlights efficient asset usage.

• Capital Needs: Raised over $10 billion debt and $1.57 billion equity funding by 2024, plus a recent IPO ($1.5 billion gross). Heavy borrowing, mostly GPU-backed, incurs significant interest expenses (~$360 million annually). Ongoing cash burn necessitates continued external financing. CoreWeave still faces a huge capex requirement to build out 1.3 GW capacity. Investors will want to watch the “cash runway” – with ~$1.5B new cash minus ongoing burn, how long until they need to raise again? The hope is that growing revenue will begin to offset capex needs by 2026, but for now CoreWeave is highly reliant on external financing to fuel growth.

• Valuation: IPO valued CoreWeave around $19 billion ($27 billion enterprise value), implying high multiples due to growth expectations. Post-IPO stock appreciation suggests continued market enthusiasm.

• Outlook (through 2026): Expected continued rapid revenue growth (potentially $3–4 billion by 2025), driven by major contracts (e.g., OpenAI). High capital spending continues, with profitability or positive cash flow likely delayed until at least 2026. Success depends heavily on executing planned capacity expansions and maintaining client commitments.

Risks 👉 Potential Pitfalls

Investors in CoreWeave should consider several critical risks:

• Capacity Risk: CoreWeave's rapid expansion to 1.3 GW across 30+ data centers poses significant overbuilding risks. If AI demand stalls or slows, CoreWeave could face costly excess capacity. Contracted commitments mitigate some risk, but potential defaults or renegotiations remain concerns. Frequent hardware upgrades (2-year GPU cycles) require continual large investments, increasing the risk of stranded assets if utilization drops.

• Competition Risk: Major cloud providers (AWS, Azure, Google) present significant competitive threats. These hyperscalers have immense resources to expand GPU capacity or adopt alternative AI chips, potentially reducing reliance on CoreWeave. Specialized competitors and hyperscalers investing in in-house solutions further amplify this competitive pressure, potentially squeezing margins and market share.

• Financial and Balance Sheet Risk: Heavy borrowing (over $8 billion in debt) leaves CoreWeave vulnerable to financial stress, including high interest costs and refinancing challenges. Negative shareholder equity means minimal financial flexibility, amplifying risks from operational setbacks. The dual-class share structure gives founders significant control despite cashing out pre-IPO, raising governance concerns. Weaknesses in financial controls and high ongoing cash burn heighten insolvency risks if revenue growth or market conditions deteriorate.

CoreWeave's aggressive growth strategy has substantial upside but comes with meaningful financial and competitive risks investors must weigh carefully.

Wrapping Up…

In short, CoreWeave offers big potential—but with big risks. It’s become a standout player in AI cloud computing right as demand is exploding, backed by major partnerships (like Nvidia) and a huge $15 billion backlog. Few startups achieve this scale so quickly, and CoreWeave could emerge as the AWS of AI if things go well. But its aggressive approach—building lots of capacity ahead of guaranteed demand—is risky.

If AI growth slows or big customers back out, things could get rough financially. Investors should keep an eye on contract updates, cash burn versus revenue growth, and relationships with major tech players.

CoreWeave is making a bold bet on the AI future—now we wait to see if it pays off.

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Cheers,

The GRIT Alpha Team

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