CoreWeave Just Gave Investors Multiple Reasons to Remain Bullish on Its Stock
Key Points
CoreWeave's stock is down around 45% from its 52-week high.
The company says that since the end of the last quarter, it's been raising prices on new compute capacity.
Higher prices should improve margins, as a lack of profitability has been a big problem for CoreWeave.
- 10 stocks we like better than CoreWeave ›
Artificial intelligence (AI) investors have been a bit bearish on CoreWeave (NASDAQ:CRWV) stock of late. It's been falling in recent months, and it's down around 45% from its 52-week high.
But there could be reasons for investors to stay positive, as the company is experiencing significant demand. It rents out compute space to tech companies, giving them access to Nvidia's latest chips. And demand is so strong that the company has been charging higher prices.
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CoreWeave says new contracts are being priced higher
On Sept. 17, CoreWeave says that since the end of June, it has been contracting out new agreements for compute capacity at higher prices. It has also increased its contracted power from 3.7 gigawatts as of the end of the quarter, up to 4.2 gigawatts. It also stated that it secured $25 billion more in new customer commitments that weren't included in its backlog as of June 30.
All in all, CoreWeave is charging more for its products and services and also securing more contracts along the way. It's a great situation for the business to be in, as demand for AI compute power remains incredibly high. Plus, being able to secure higher prices for compute capacity can help the company's margins improve.
A big sore spot for CoreWeave has been that while its growth rate has been impressive, the business has struggled with profitability. In the trailing 12 months, it has incurred an operating loss of $231 million on $7.6 billion in revenue. And this is before factoring in other overhead and interest expenses; its net loss over that time frame has totaled $1.9 billion.
Higher prices may not suddenly make the business profitable, but shrinking its losses could go a long way in giving investors a reason to be more bullish on the AI stock moving forward.
Is CoreWeave's stock a good buy today?
Year to date, CoreWeave's stock is up around 18%. It's down from its high, but if its growth rate accelerates and margins improve, the stock may be able to reach new heights in the near future. Investing in CoreWeave can be a good way for investors to profit from the AI-fueled growth in tech.
There is risk with CoreWeave given its lack of profitability and with so much depending on AI-driven demand, but for AI investors bullish on the long-term growth opportunities in AI, the stock may be a compelling buy right now, due to not only its reduced valuation but also these latest developments.
Should you buy stock in CoreWeave right now?
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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