CoreWeave: Buy The Debt?

Everyone talks about “buy the dip,” but what about “buy the debt”? With CoreWeave, it’s not just AI and finances—it’s a bet on the team behind the scenes.

CoreWeave finds itself in the most challenging position since its market debut. Its stock price has been declining, analysts are offering conflicting forecasts, and the once-burning enthusiasm among investors has all but vanished.

Notably, analyst Dan Ives did not include CoreWeave in his list of the top 30 leading AI companies. As the latest earnings report showed, the company is being dragged down by a massive $11 billion debt and high operating expenses—driven by the constant need to deliver ever-higher levels of service for demanding clients like OpenAI and Microsoft. But what is really happening beneath the surface?

Mounting Pressure

The pressure on CoreWeave is only mounting. The company’s ambitious drive to stay ahead in the AI infrastructure race means relentless investment in new hardware, data centers, and personnel. While this strategy has enabled it to attract high-profile clients and position itself as a potential leader in the sector, it has also resulted in spiraling costs and shrinking margins.

Adding to the uncertainty is the recent market reaction: despite a record revenue surge of $1.2 billion in the last quarter—a staggering 207% year-over-year increase—CoreWeave’s shares tumbled as investors focused on the bottom line. Losses widened, and operating margin fell sharply, reflecting the heavy toll of stock-based compensation and rapid expansion.

Source: CoreWeave

Meanwhile, competition in the AI cloud sector is intensifying. Giants like Amazon Web Services and Microsoft Azure are investing billions of dollars to cement their dominance, forcing CoreWeave to continually justify its premium offerings—and its premium prices.

Yet, amid all the financial strains and market skepticism, CoreWeave’s backlog of contracted business has swelled to a record $30.1 billion, up $4 billion from the previous quarter and doubling since the start of the year. This surge in backlog hints at massive future demand for its services but also raises the stakes for ramping up capacity efficiently.

The question now confronting investors is whether the company can convert this demand into sustainable profitability, or whether its aggressive expansion will continue to weigh down its financial results.

With so much at stake, the next few quarters could determine CoreWeave’s fate—not just as an AI pioneer, but as a viable long-term business.

A Big Spender

CoreWeave’s business is built around providing high-performance cloud infrastructure optimized for artificial intelligence. The core of its financial model is long-term, “take-or-pay” contracts with giants like OpenAI and Microsoft. About 96% of its revenue comes from these deals, typically lasting 2–5 years and guaranteeing predictable cash flow.

How does the model work?

• Clients pay up-front or commit to multi-year payments for dedicated GPU capacity.

• CoreWeave uses that capital to rapidly purchase the latest Nvidia GPUs and expand data center capacity.

• The infrastructure built for one contract later becomes part of CoreWeave’s on-demand offering once the original deal is fulfilled.

• This has led to an exploding backlog—recently reaching $30.1 billion, up $4 billion from the previous quarter and doubling in just six months.

Why such fast cash burn?