The AI-infrastructure company’s stock has been hammered on concerns over losses and debt. But Cantor Fitzgerald says CoreWeave is a ‘best-in-class’ player whose shares could climb to $116.

Investors were disappointed by a bigger-than-expected net loss in CoreWeave’s second quarter. Here, CoreWeave executives Peter Salanki, Brian Venturo, Mike Intrator and Brannin McBee are shown at Nasdaq headquarters for the company’s initial public offering on March 28.

Shares of CoreWeave Inc. have fallen by more than 50% from their all-time highs. Is it a sign that the artificial-intelligence infrastructure company’s momentum is cooling, or is it just a bump on the road to further stock gains?

Cantor Fitzgerald analyst Thomas Blakey believes it’s the latter. He initiated coverage of CoreWeave’s stock on Tuesday with an overweight rating and a price target of $116.

CoreWeave’s stock has declined 40% since the company’s second-quarter earnings call on Aug. 12, when management announced a steeper loss than analysts were expecting. General concerns that the AI trade may be overextended have also dampened investor sentiment toward the sector.

However, Blakey believes the concerns are overblown. He calls CoreWeave a “best-in-class” player in the GPU-as-a-service market, which is projected to reach $399 billion in 2028. Cantor Fitzgerald’s industry checks indicate that CoreWeave is the leading AI-infrastructure provider and strategic partner, he said, outperforming peers with its offerings.

While few deny CoreWeave’s leadership, some analysts have reservations about the stock given execution risk surrounding customer concentration, financing and power supply. For instance, Needham analyst Mike Cikos recently cautioned investors to keep an eye out for CoreWeave’s “non-linear ramp to capacity versus revenue generation,” and D.A. Davidson analyst Gil Luria flagged CoreWeave’s heavy reliance on debt to drive growth.

As CoreWeave continues to build out data centers and purchase GPUs, it will have to prove to investors that it can scale its business to meet demand and lock down long-term contracts with clients. Blakey believes the company is on track to execute on its growth plans.

CoreWeave’s top two customers account for nearly 80% of its revenue, with Microsoft Corp. likely the largest customer, according to Blakey. However, the growth trends among CoreWeave’s top customers are robust, “driving near-term comfort in CoreWeave forecasts and customer concentration,” he wrote. Nvidia Corp. is also a customer and strategic partner and was an investor in CoreWeave’s March initial public offering, solidifying the company’s competitive advantage and providing CoreWeave with close access to the newest GPU hardware.

As CoreWeave’s revenue and backlog shift more from AI training to inference, Blakey sees a “larger market opportunity” for the company, which he said could be a “long-term driver.” Investors looking for more customer diversification should also note that the company’s acquisition of developer platform Weights & Biases in May “adds nearly 1,500 customers that CoreWeave can target to resell its compute services,” he added.

CoreWeave is also well-positioned to tackle the power bottleneck with its recently announced acquisition of Core Scientific Inc., which will provide access to 1.3 gigawatts of power through its national data-center footprint. Blakey believes this move will improve profitability and serve as a “near-term catalyst” for the stock.

In addition to providing power to help CoreWeave become less supply-constrained, the acquisition of Core Scientific also addresses investor concerns about CoreWeave’s financing costs. The transaction will give the company ownership over data centers instead of leasing them, helping save $10 billion in future lease liability overhead. The company has been making progress toward its goal of reaching investment-grade debt status in the coming years.

Some on Wall Street are taking a more cautious view on CoreWeave, but Blakey believes the company’s big bets on building out infrastructure and ramping up power will pay off down the road, making the stock’s pullback a buying opportunity.