Why CoreWeave Stock Rocketed Higher in September

Key Points

• Updates on CoreWeave's contracted capacity totaled over $20 billion in September.

• One of the customers previously had agreed to another almost $16 billion worth of business.

• CoreWeave also started a venture fund last month to immerse itself further into AI.

• 10 stocks we like better than CoreWeave ›

CoreWeave (NASDAQ: CRWV) shareholders had a good month of September. The stock soared 32.8% last month, according to data provided by S&P Global Market Intelligence.

The artificial intelligence (AI) cloud services hyperscaler continued to pile up deals to fill its advanced computing capacity. A total of over $20 billion in contract value was announced last month. And that doesn't include another nearly $16 billion already contracted with one of the customers involved.

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CoreWeave is landing multibillion-dollar deals

Investors are bidding up CoreWeave stock as it positions itself to support the computing power needs of top AI companies. In late September, CoreWeave announced it was expanding an agreement with ChatGPT creator OpenAI by up to $6.5 billion.

The initial agreement to provide OpenAI cloud services worth almost $12 billion was announced earlier this year. That was expanded in May by $4 billion, and then the most recent expansion of $6.5 billion. That agreement is now worth up to more than $22 billion.

Another agreement for its AI cloud infrastructure worth up to about $14.2 billion was announced last month. CoreWeave already has a master service agreement (MSA) with Meta Platforms, and this announcement expanded that relationship.

An MSA with Meta was created about two years ago, creating the framework for future business. The newly announced contract will run through Dec. 14, 2031.

Is CoreWeave stock a buy?

Those business developments helped drive the stock higher last month. Management also announced a new venture capital initiative to further expand its AI footprint. The company said it launched CoreWeave Ventures as "a new initiative committed to backing founders and companies developing the platforms and technologies shaping the AI ecosystem."

It has already announced two acquisitions through the venture. They include two different AI developer platforms for training AI agents and building AI models.

On many levels, the future looks bright for CoreWeave. As of the end of the second quarter, it already had a revenue backlog of over $30 billion. Investors should remain cautious, though. Its valuation depends on the AI story playing out without setbacks. Its market cap is nearly $70 billion, and it holds over $10 billion in total short- and long-term debt.

CoreWeave also continues to spend heavily to build its capacity, including nearly $3 billion in the second quarter. The stock could well reverse course and plunge amid any slowdown in AI infrastructure spending or even a market downturn. It should be considered an aggressive investment, with buying in stages to take advantage of downturns potentially being the best strategy.

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Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.