CoreWeaves

Few stocks are as directly exposed to artificial intelligence as CoreWeave (CRWV 0.72%). The AI cloud infrastructure company reinvented itself, transitioning from a crypto mining company by repurposing its GPUs to provide AI computing power to customers like Microsoft, Nvidia, and OpenAI.

With the AI boom in full swing, that business model has led to jaw-dropping growth. In its second quarter, its revenue jumped 206% to $1.21 billion, showing how fast demand for its services is ramping up.

Now, CoreWeave just got another shot in the arm as the stock jumped 12% on Tuesday after announcing another blockbuster deal, this time with Meta Platforms (META 1.35%).

Image source: Getty Images.

What’s happening with CoreWeave and Meta?

Meta is committing to spend up to $14.2 billion through 2032 on cloud computing capacity from CoreWeave, with an option to expand its commitment.

The deal comes at a time when Meta has been ramping up its spending on AI, seeing it as a must-win for its future. In June, Meta acquired a 49% stake in Scale AI, a data-labeling start-up, and poached its CEO, Alexandr Wang, to run its new AI lab.

On the same day that the CoreWeave news came out, Meta also announced that it’s buying the chip start-up Rivos, which designs chips based on RISC-V architecture, an alternative to those used by leading CPU architecture designers Arm, Intel, and AMD. Rivos is also expected to help Meta build out full-stack AI systems.

For CoreWeave, the deal builds on the earlier momentum it earned when it signed an expanded $6.5 billion agreement with OpenAI in September, bringing its total contract with OpenAI to $22.4 billion.

The drumbeat of positive news for AI includes rival Nebius’s $17 billion deal with Microsoft, Oracle’s huge cloud computing forecast, and CoreWeave’s own wins, including OpenAI, Meta, and a $6.3 billion deal with Nvidia, in which it will buy any of CoreWeave’s unused capacity, effectively backstopping the company’s growth.

Those news items, and improving sentiment around CoreWeave, sparked a recovery in the stock last month. After falling by more than 50% from its peak in June, CoreWeave jumped more than 50% off its lows early in September.

Is CoreWeave overvalued?

CoreWeave is a challenging stock to value. The company is delivering phenomenal top-line growth, but it’s also reporting huge losses. The company’s business model is risky. It’s borrowing billions of dollars to buy Nvidia GPUs and build out the infrastructure to provide next-generation AI computing.

That high-interest debt has also led CoreWeave to pay significant interest expense, set to be above $1 billion this year, essentially preventing CoreWeave from turning a profit.

For most stocks, to determine an appropriate valuation, you just look at the numbers. However, CoreWeave is in a class of its own. Given its growth rate, in which revenue is still tripling, the upside potential for the stock is tremendous, and conventional cloud computing businesses like Amazon Web Services and Microsoft Azure have shown how profitable cloud computing can be at scale.

Rather than parsing the numbers for CoreWeave to determine whether the stock is overvalued, investors are better off considering the future of the AI boom. If the massive capex buildout continues, including on CoreWeave’s infrastructure, the stock is a good bet to be a winner. At a market cap of $66 billion, the stock still has room to move higher.

However, if the AI boom turns into a bubble and spending suddenly slows, CoreWeave is likely to plunge. While it’s locked in multi-billion-dollar deals with the likes of Meta, the company will need more of those to turn profitable and justify its current valuation.

Either way, expect the volatility in the stock to continue.

It’s been just six months since CoreWeave (CRWV -4.96%) went public, and the stock has more than tripled in its short life as a public company, despite witnessing bouts of volatility during this period. The stock’s rapid rise has been fueled by its fast-improving revenue pipeline, but at the same time, investors have been worried about certain factors.

From CoreWeave’s rapidly rising debt to stock dilution on account of its $9 billion Core Scientific deal, shares of the company have slipped significantly since hitting a high nearly three months ago. However, the company’s latest deal with Nvidia (NASDAQ: NVDA) could help assuage investors’ concerns to some extent and set CoreWeave up for more upside.

Image source: Getty Images

Nvidia’s guarantee is great news for CoreWeave investors

CoreWeave has built its business by offering dedicated artificial intelligence (AI) data centers powered by graphics processing units (GPUs) from Nvidia. It rents out its cloud computing capacity to the likes of Meta Platforms and Microsoft, which account for the majority of its top line. It has also added a third big customer in the form of OpenAI.

The ChatGPT maker offered an initial contract worth $11.9 billion to CoreWeave in March this year, before enhancing the size of the deal by another $4 billion. And now, Nvidia has signed a $6.3 billion contract with CoreWeave that will guarantee the latter’s revenue growth in the long run. Under this agreement, Nvidia will be purchasing any unsold data center capacity from CoreWeave through April 2032.

In a filing with the Securities and Exchange Commission (SEC), CoreWeave pointed out that “Nvidia is obligated to purchase the residual unsold capacity” of its data centers in case its “data center capacity is not fully utilized by its own customers.” CoreWeave’s existing data center capacity is falling short of demand.

CFO Nitin Agrawal remarked on the August earnings conference call that CoreWeave’s “growth continues to be capacity-constrained, with demand outstripping supply.” This is evident from the fact that its contractual backlog increased by close to $14 billion year over year in Q2, driven by the multibillion-dollar contracts the company signed in the quarter.

For comparison, CoreWeave’s Q2 revenue increased to $1.2 billion from $395 million in the year-ago period. Not surprisingly, the company is laser-focused on bringing online more data center capacity so that it can fulfill its massive revenue backlog worth $30 billion. It currently operates 33 dedicated AI data centers in the U.S. and Europe, with active power capacity of 470 megawatts (MW).

However, it has been increasing its contracted data center power capacity at a nice clip so that it can bring more active capacity online. Specifically, CoreWeave’s contracted data center power capacity increased by 600 MW in the previous quarter to 2.2 gigawatts (GW). But even that might not be enough in the long run, as according to McKinsey, data center capacity demand could grow by 4x between 2023 and 2030.

The firm estimates that global data center capacity demand could hit 220 GW in 2030 from 55 GW in 2023 in a midrange scenario. So there is a good chance that CoreWeave could remain capacity-constrained in the long run thanks to the AI-powered data center boom. For instance, McKinsey is expecting a deficit of more than 15 GW in data center power capacity in the U.S. itself by 2030.

As such, CoreWeave may not be left with any residual capacity to sell to Nvidia going forward, as there is a good chance that data center demand will continue to be stronger than supply on account of AI. And now, Nvidia’s guarantee gives CoreWeave investors an extra cushion that should ensure healthy long-term growth for the company, even if there’s a drop in AI computing capacity requirements.

What should investors do?

Nvidia’s guarantee suggests that the demand for AI computing is likely to remain robust in the long run. This should ideally translate into a bigger backlog and stronger growth for CoreWeave, which is just what analysts are expecting from the company through 2028.

CRWV Revenue Estimates for Current Fiscal Year data by YCharts

The massive opportunity in the cloud AI infrastructure market should help CoreWeave sustain impressive growth rates beyond 2028. For instance, even if it clocks 20% annual top-line growth in 2029 and 2030, its revenue could hit $25.6 billion. If the stock is trading at even 5 times sales at that time, in line with the Nasdaq Composite‘s average sales multiple, its market cap could get close to $130 billion. That would be more than double CoreWeave’s current market cap.

Importantly, CoreWeave can now be bought at 16 times sales, which isn’t all that expensive when we consider its remarkable growth.

So investors looking to capitalize on the AI cloud infrastructure market’s long-term growth potential can consider buying this AI stock right away, especially considering that the Nvidia deal is a vote of confidence in CoreWeave’s — and the AI data center market’s — prospects.

Nvidia (NVDA 3.52%) enjoys great relationships with some of the biggest tech companies on the planet. Its customer base includes the three largest cloud service providers: Amazon (AMZN -0.16%), Microsoft (MSFT -0.30%), and Google parent Alphabet (GOOG 1.04%) (GOOGL 1.06%).

However, Nvidia’s reach isn’t limited to the biggest of the big. It also works closely with many rising stars. CoreWeave (CRWV 0.39%) is arguably the most prominent example, especially considering that Nvidia has a multibillion-dollar stake in the AI-focused hyperscaler.

It stands to reason that Nvidia wants all these partners to succeed. But did the GPU giant just help Amazon, Microsoft, and Google at CoreWeave’s expense?

Image source: Getty Images.

Nvidia’s retreat

Nvidia launched DGX Cloud in 2023. The company billed the new platform as a way for enterprises to get immediate access to Nvidia’s AI supercomputers so they could train generative AI and other advanced AI models.

But Nvidia appears to be retreating from this market. The Information, a website that focuses on technology industry news, recently reported that Nvidia is primarily using DGX Cloud for internal use now instead of marketing the platform to customers.

Is there other evidence that supports the view that Nvidia is shifting its strategy? Maybe. In the past, Nvidia highlighted its DGX Cloud services when discussing cloud spending commitments in its quarterly 10-Q filings. In the company’s update for the second quarter of 2025, though, DGX Cloud wasn’t mentioned in this context.

Instead of marketing the DGX Cloud platform to customers, Nvidia appears to be focusing now on its Lepton GPU rental marketplace. CEO Jensen Huang explained in the May 2025 announcement of Lepton that the new service “connects our network of global GPU cloud providers with AI developers.”

Helping the “big three,” hurting CoreWeave?

Some industry observers saw DGX Cloud as a move for Nvidia to compete against the major cloud service providers. But Nvidia rented GPUs from CoreWeave to use with DGX Cloud. Could the company’s reported move to back away from marketing DGX Cloud help Amazon Web Services (AWS), Microsoft Azure, and Google Cloud while hurting CoreWeave? The short answer is “no.”

For one thing, Microsoft Azure and Google Cloud host DGX Cloud. Although AWS didn’t, there’s no solid proof that Nvidia’s cloud platform hurt its business.

A retreat from DGX Cloud wouldn’t hurt CoreWeave, either. CoreWeave recently disclosed that Nvidia will purchase $6.3 billion of its unused cloud computing capacity through April 13, 2032.

Perhaps most importantly, though, Nvidia might not be retreating from DGX Cloud as reported by The Information after all. According to Data Center Dynamics, Alexis Bjorlin, who is Nvidia’s vice president and general manager for DGX Cloud, said, “DGX Cloud is fully utilized and oversubscribed, and we are expanding its scale.”

Winners all around

Whatever Nvidia’s strategy with DGX Cloud is, I don’t think CoreWeave has anything to worry about. My view is that all of these stocks — Nvidia, Amazon, Microsoft, Alphabet, and CoreWeave — are poised to be big winners over the long run.

The AI boom doesn’t appear to be slowing down. That’s great news for Nvidia because more of its GPUs will be needed. It’s great news for Amazon, Microsoft, Alphabet, and CoreWeave because their cloud platforms will continue to enjoy tremendous demand.

It’s possible that the momentum could even accelerate. I think Nvidia’s technological advances will play a key role, if so. For example, the company plans to launch Rubin CPX, a new class of GPUs built for massive-context inference, in late 2026. This new technology could pave the way for an explosion in the use of AI in software development and long-form video creation.

As the smallest of the group, CoreWeave might have the most room to run. However, I expect all five of these top AI stocks will deliver tremendous gains over the next 10 years and beyond.