MW Banner results from Microsoft trigger bulge-bracket upgrade for CoreWeave

By Jules Rimmer

CoreWeave shareholders have become accustomed to volatility. After floating at a price of $40, the AI-cloud computing almost quintupled to $187 before a severe correction began in June. The stock almost halved to $100 as investors fretted over a questionable acquisition, its debt overload and the concentration risk of one big customer: Microsoft.

Now, though, after Wednesday's spectacular earnings release from Microsoft $(MSFT.UK)$ which illustrated the growth potential of the AI boom, Citi is upgrading its recommendation on CoreWeave (CRWV) to buy from neutral.

The fundamental premise of the investment case would appear to be that the downside of having one hugely important client is offset by the fact that client is Microsoft. A customer who has just committed to capital expenditure of $100 billion in the next year is a good customer.

It's not just Microsoft, though. Nvidia (NVDA), which owns a stake in CoreWeave, gives priority access to CoreWeave for its latest chips, and OpenAI has struck two deals in recent months.

While Citi is not changing its target price or its earnings estimates, the CoreWeave analyst team, led by Tyler Radke, notes its revenue forecast is already 4-6% ahead of consensus and a $160 target price implies plenty of upside for traders who can stomach the volatility. At that level, CoreWeave would trade on 25 times its earnings per share for 2026 which is not such a significant premium to the S&P 500's multiple of roughly 24 times.

Of the analyst target prices collated by FactSet, Citi's is one of the most aggressive but sentiment towards the stock in the research community is generally positive. Only two of the two dozen or so analysts rate the stock a sell. Traders are more skeptical, as evidenced by the 9.84% of the shareholder base that is currently shorted, according to data from Fintel.

Citi's note, entitled Ramping AI demand should continue into FY26" states: "We believe the robust strength in Azure combined with existing multi-year contracts with Microsoft, OpenAI ($15.9b), and others will drive accelerating revenue growth heading into FY26, particularly with the integration of Core Scientific bringing additional power assets and lease cost synergies. We feel incrementally more confident about the durability of AI demand and CRWV's position in the market."

Risks to the CoreWeave buy argument are easy to identify: the company has $8 billion of debt (incurring $1 billion in interest payments alone) and the lock-up expiry for long-term shareholders is Aug. 15, which may prompt some selling considering the profits they have made. Citi's upgrade comes with a "high-risk" qualifier.

The next important milestone for CoreWeave will be its second quarter earnings release, slated for Aug, 12.

-Jules Rimmer

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July 31, 2025 08:26 ET (12:26 GMT)

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