Down 50% From Its High, Is CoreWeave a Bargain or a Value Trap?

CoreWeave (NASDAQ: CRWV) has been an up-and-down investment since the company went public in April 2025. It started as one of the hottest stocks in the market and notched one new high after another. Now it's down around 50% from its peak. The question is, can CoreWeave return to those highs, or is it just a value trap at this time?

I think investors need to start looking at the stock a bit differently than they have before.

Image source: Getty Images.

Investors need to look forward, not backward

CoreWeave is a neocloud company that provides AI-focused cloud computing resources. Two of its major clients are Meta Platforms (NASDAQ: META) and Microsoft (NASDAQ: MSFT), which use its data centers to bolster their AI computing capacity. One of its biggest backers is Nvidia (NASDAQ: NVDA). Nvidia crosses paths with a lot of companies in the AI world, so its decision to invest in CoreWeave was notable. According to its most recent 13-F form, Nvidia held around $3.6 billion worth of CoreWeave stock as of the end of the first quarter. Relative to CoreWeave's market cap of about a $50 billion, that's no small position.

However, there has been major media coverage recently concerning one of CoreWeave's biggest clients: Meta. Although Meta hasn't confirmed it, reports say that it's forming a cloud infrastructure business of its own -- something that CEO Mark Zuckerberg had previously stated would happen only if the company felt it had excess AI computing power to lease. One way for it to remedy the problem of having excess computing power would be to terminate its contract with CoreWeave, which is why the neocloud stock has sold off so much in recent days. However, with the world still being in a compute-constrained state, having access to excess computing power isn't a bad thing, so it's likely that Meta's contract with CoreWeave will play out as originally expected.

So is CoreWeave still a good investment? From a revenue growth standpoint, it's expected to deliver some incredible results. Wall Street analysts expect 147% top-line growth this year and 98% growth next year. The biggest question mark with CoreWeave doesn't concern revenue; it concerns profit. Wall Street expects the company to lose $ 4.64 per share this year as it spends freely to build as much computing capacity as possible, as rapidly as possible. Those capital expenditures will continue to result in major losses as its infrastructure build-out continues, but the company could flip the switch to profitability if and when it decides that it has captured as much market share as it wants. That probably won't happen for some time, though, so shareholders will need to be OK with the company booking further losses.

This creates some added execution risk for investors, and the market has priced CoreWeave's stock with skepticism. It's trading at 7.1 times sales, which is a pretty cheap valuation. If CoreWeave could snap its fingers and deliver a 30% profit margin, it would be trading for 24 times earnings. If one bases its valuations on next year's revenue projections, the stock is valued at just 1.9 times sales. Using that same hypothetical 30% profit margin, that would price CoreWeave at 6.3 times forward earnings.

So if CoreWeave can maintain its business and turn profitable, it could be a worthwhile investment. However, it may take some years before it turns that corner, and investors should use where the stock trades right now as their anchor point, not the higher prices it saw in the first couple of months after its IPO.

Keithen Drury has positions in Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.