CoreWeave Owes $21 Billion. Its Customers Are Its Biggest Risk.
Key Points
CoreWeave is paying roughly 25% of revenue just to cover interest on its $21 billion debt load.
OpenAI accounts for over $20 billion of CoreWeave's backlog, yet OpenAI expects to burn $115 billion before turning a profit, creating significant risk.
CoreWeave's reliance on hyperscalers may be short-lived, as these tech giants have strong incentives to bring AI compute capabilities in-house.
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CoreWeave (NASDAQ: CRWV) grew revenue 168% last year to $5.1 billion, it carries a $66.8 billion backlog, and the artificial intelligence cloud computing company is guiding for revenue north of $12 billion for 2026.
The growth is real, but if you ask me, it's built on shaky ground.
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The debt burden behind the growth
Along with the revenue growth, CoreWeave also nearly tripled its debt over the last year and now has $21 billion on the balance sheet, with an average interest rate of roughly 11%. That means the company is paying about 25% of its top-line revenue just to cover the interest on its loans.
Image source: Getty Images.
CoreWeave's business is also still in the red, losing nearly $1.2 billion last year, up from an $867 million loss in 2024. There are plenty of examples of companies that take years to turn a profit, burning cash up front to lay the groundwork for future income. That's the idea here, too. But I'm not convinced that the calculus will work out.
CoreWeave's biggest customers are also its biggest risk
There are several reasons to doubt, and chief among them is CoreWeave's reliance on just a handful of customers, most of which are natural competitors like Microsoft, which is responsible for 70% of CoreWeave's revenue. The hyperscaler and tech giant may need the extra capacity now, but down the line, it makes much more sense for it to bring this service in-house.
ChatGPT creator OpenAI is responsible for more than $20 billion of the $66.8 billion backlog. It has hundreds of billions of commitments to other companies, too, yet it is losing money at a pace never before seen. OpenAI expects to burn $115 billion through 2029, when it finally turns a profit -- a timeline that is extremely optimistic. Until that time -- and likely well beyond -- OpenAI will need to be continually funded at an unprecedented pace.
CoreWeave's model is too fragile for my taste, especially given the increasing likelihood of a recession. The Federal Reserve may also be forced to hike rates to combat inflation -- spiking the company's borrowing costs. Or both may happen.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.
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