Debt-Fueled CoreWeave Surges on the AI Boom. Is the Stock a Buy?

Key Morningstar Metrics for CoreWeave

• Fair Value Estimate: $106.00
• Morningstar Rating: ★★★
• Economic Moat: None
• Morningstar Uncertainty Rating: Very High

Among the stocks riding the artificial intelligence boom is CoreWeave CRWV. The data center operator is at the heart of the AI infrastructure buildout, and its shares have tripled in a volatile rally since its IPO in early 2025. But while the outlook for AI seems bright, if CoreWeave is to continue its rally in the long term, it must dodge some big risks.

Thanks to CoreWeave’s business model of borrowing heavily to fuel its growth, it’s vulnerable to both rising interest rates and slowdowns in the massive data center spending by AI labs, which would lead to a shortfall in expected compute demand, Morningstar analysts say. Given the stock’s wide swings, investors also may need a strong stomach.

For now, at least, many investors appear to believe that CoreWeave’s strategy of leveraging to build data centers will pay off. CoreWeave, which began life as a cryptocurrency mining company, has seen its stock go from a lukewarm reception at its March 2025 IPO price of $40 per share to $120 per share today. The roughly 210% gain is far ahead of the US stock market’s 38% gain during that time, as measured by the Morningstar US Market Index.

Along the way, though, the stock has been highly volatile. CoreWeave shares hit a peak of roughly $160 last June and a low just north of $71 in December. Last month, the stock fell more than 28% in less than two weeks, dropping to just below $100 per share from $138, following its first-quarter earnings release. It then rallied back more than 29% over the following two weeks.

For CoreWeave, Debt Is Part of the Business Model

CoreWeave is one of several “neocloud” companies, borrowing to build out AI infrastructure and then renting it to customers willing to sign take-or-pay contracts for years of computing capacity. CoreWeave’s clients include OpenAI, Meta Platforms, and Microsoft. The company’s cloud-based AI infrastructure is powered by Nvidia’s graphics processing unit chips, which are used to train large language models.

CoreWeave’s business model relies heavily on debt to fund its expansion of data centers. The company uses delayed draw-term loan facilities and customers’ prepayments to buy the GPUs (which efficiently process massive amounts of data and graphics) and networking equipment it needs to fulfill its obligations. CoreWeave has over $21 billion in debt on its balance sheet as of 2025, and a notable total debt to equity ratio of 7.39.

CoreWeave will likely need to borrow much more to build the entire capacity it has planned before 2030, according to Morningstar equity analyst Luke Yang. Its “aggressive financing approach makes it one of the most leveraged companies across Morningstar’s technology coverage.” Yang wrote in his report on CoreWeave. Leverage is “a feature of the business,” he says.

Demand Seen Staying Strong in the Near Term

CoreWeave’s stock took a hit last month, following first-quarter earnings that showed weaker-than-expected margins. However, Yang says the results showed “robust” demand, a dynamic he expects to continue. “The major customers, like Microsoft, OpenAI, and Meta, are going to continue to work with CoreWeave, and more enterprise customers are going to want to train their own machine learning models and become CoreWeave customers.”

Yang forecasts a five-year revenue growth rate at 67%. “We’re expecting a period of rapid growth over the next couple of years ... over the next two to three years, at least, I’m not concerned about demand tapering.” He says another potential avenue of growth for CoreWeave is building some switching costs into services by developing its own software layer. He notes that the company acquired AI development platform Weights & Biases in May 2025, potentially for this purpose.

Yang says CoreWeave also has a competitive advantage in its close ties with Nvidia, from whom it was among the first to receive the latest-generation technology. The two companies are tightly integrated. CoreWeave received a $2 billion investment from Nvidia earlier this year, giving the chipmaker an 11.5% ownership share.“Nvidia and CoreWeave are deepening their infrastructure, software, and platform alignment,” Nvidia CEO and founder Jensen Huang wrote in a January press release.

CoreWeave’s Risks

While Yang sees a strong outlook for demand, he points to two key risks. The first is the debt load, which means the company could be vulnerable to a spike in financing costs. “They’re super leveraged,” he says. “Rising interest rates could break CoreWeave’s business model in terms of long-term growth opportunities,” he says.

The biggest risk, he says, is the uncertain long-term outlook for AI cloud infrastructure. “If demand really goes down and the CoreWeave can’t rent out all their capacity, it will be a very big issue for them.”

Is CoreWeave Stock a Buy, Sell or Fairly Valued?

At roughly $119 per share, CoreWeave is trading just north of its fair value estimate of $106. Morningstar assigns a Very High Uncertainty Rating to the stock, which means a larger margin of safety is required for the shares to be considered undervalued, and that a wider band is applied before it becomes overvalued.

“The stock is pretty volatile, so I would advise investors to be cautious of a bumpy ride because of all the high leverage,” Yang says. Given its current valuation, “for long-term investors, I would definitely encourage a better entry point on the stock.”

The following are excerpts from Yang’s commentary on CoreWeave.

CoreWeave’s Economic Moat

We do not think CoreWeave has an economic moat at the moment. CoreWeave is one of the four leading neocloud companies (CoreWeave, Nebius, Crusoe, Lambda Labs) that provide essential infrastructure (in most cases, Nvidia GPUs) for AI training and inference. The AI cloud infrastructure market is extremely competitive, with over 200 companies offering similar computing infrastructure. Players like Amazon, Microsoft, Alphabet, and Oracle are much larger than CoreWeave. Even in a scenario where CoreWeave successfully scales its annual revenue to $100 billion and more over the next decade, company-level return on invested capital still struggles to surpass its cost of capital.

CoreWeave’s Fair Value and Profit Drivers

Our fair value estimate for CoreWeave is $106 per share, which implies an enterprise value/sales multiple of 6 times. Despite our five-year compound annual revenue growth forecast of 67%, we do not expect a positive free cash flow or GAAP earnings per share over the next three years. CoreWeave should remain in a stage of heavy capital outlay to expand its cloud service capacity.

Over the next three to five years, bookings from established AI providers like Microsoft, OpenAI, and Meta should allow CoreWeave’s revenue to scale quickly. These three customers have currently committed over $66 billion to CoreWeave through 2032, and we expect them to expand their commitments over time as generative AI finds more use cases across our everyday lives. We also think that as the price per GPU hour becomes cheaper, it will enable long-tail demand where organizations start to introduce dedicated GPU clouds for proprietary model training or fine-tuning.

CRWV Bulls Say

• CoreWeave’s deep Nvidia integration makes it a go-to choice for customers looking for best-of-breed GPU clouds, potentially earning CoreWeave a place when supply catches up with demand in the long term.
• CoreWeave is making an effort to expand its software ecosystem, which can become a new growth point as new offerings become available.
• Reduction in the unit price of GPU compute should unlock more use cases around large language models, expanding CoreWeave’s total addressable market.

CRWV Bears Say

• The long-term demand for AI cloud infrastructure is highly uncertain. If CoreWeave can’t rapidly ramp up revenue, it might default on its debt, leaving its equity stake worthless.
• CoreWeave needs to overcome multiple supply chain challenges to deliver the contracted capacity on time. Any delays in capacity delivery can negatively impact its growth.
• CoreWeave’s future expansion plan can fall apart if the company is not able to secure the funds it needs for its cloud buildout.