- Investors reacted poorly to CoreWeave's first earnings report since its IPO
- The company posted massive revenue growth and unveiled a new $4 billion deal with OpenAI but also plans to spend a hefty sum on capex
- Analyst Jack Gold said the worry is that CoreWeave's niche strategy could backfire if the AI bubble bursts
CoreWeave is stuck between a rock and a hard place. If it moves too slow, it’ll be left behind as the AI wave sweeps past. If it moves too fast and spends too much, its shiny new investors get upset.
The company found itself ensnared in the latter trap after reporting its first batch of earnings since its IPO in March. Its stock price tanked despite a 420% year on year jump in revenue, high-profile deals with both OpenAI and IBM, and a pipeline of $14.7 billion in remaining performance obligations (excluding the OpenAI contract).
CoreWeave actually now has two deals with OpenAI: an original $11.2 billion contract the pair signed just before CoreWeave’s IPO and a second $4 billion agreement CoreWeave revealed during earnings in its 10-K filing.
The catch, however, is that CoreWeave is planning to spend a LOT of money to meet customer obligations to OpenAI and others – $20 to $23 billion in 2025 to be exact. And that spending is well above the $5-ish billion in revenue it expects for the year.
Investors were not happy, initially sending CoreWeave’s share price tumbling before it recovered on Friday.
“The major issue for CoreWeave is they want to be seen as THE AI data center company. That’s fine, but how do you make money doing that right now?” J. Gold Associates Founder Jack Gold asked in a conversation with Fierce. “Doing a relationship with OpenAI is fine, but OpenAI isn’t making any money, so how is CoreWeave making money?”
Indeed, OpenAI – CoreWeave’s premier partner – reportedly lost $5 billion in 2024 despite being one of the leading lights in the AI realm. That doesn’t bode well for CoreWeave, Gold said, especially considering recent studies have indicated that three-quarters of companies experimenting with AI aren’t seeing a return on their investments.
What that means, Gold said, is that there could be a pullback in spending on AI if the tech doesn’t deliver the results enterprises are seeking.
While companies like Microsoft, Google and Amazon have other revenue streams to insulate them from an AI crash, Gold said it’s not clear what CoreWeave’s fallback is if the AI bubble bursts and leaves it sitting on an idle hoard of pricey GPUs.
“Investors are saying slow down, figure out how you’re going to sell this today,” he concluded.