CoreWeave Stock Is Up Over 40% to Start 2026. Here's Why Investors Aren't Too Late.

Few stocks have had as good a start to 2026 as CoreWeave (NASDAQ: CRWV). In under a month, shares of the data center specialist have risen an incredible 40%. That's more than most stocks hope to return in a few years, let alone a few weeks. After a run like that, it's logical to wonder if this is the start of something bigger, or just a fluke.

I think there's a case to be made for both sides, but I do lean more bullish than bearish on this stock. Here's why.

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CoreWeave is a lifeline for the AI hyperscalers

It's not cheap or easy to bring the massive amounts of computing power online necessary for training and running generative artificial intelligence (AI) workloads. While AI hyperscalers like Alphabet and Microsoft are building their own data centers to run workloads on, they also don't want to become asset-heavy businesses. These companies want to stay light and nimble, and having a multibillion-dollar data center on their balance sheet that depreciates does not fit their goal.

While they are content to build some of their own data centers to control costs, it also makes sense for them to rent computing power from other companies, such as CoreWeave. CoreWeave builds data centers, then fills them with cutting-edge graphics processing units (GPUs). Then, clients can rent this computing power from CoreWeave. This is essentially an AI-focused cloud computing business, and it's growing at an incredible pace.

During the third quarter, CoreWeave's revenue increased 134% year over year to $1.4 billion. That's an impressive result, and it's not expected to slow its growth anytime soon. The company has a $55.6 billion revenue backlog that it has to churn through in a relatively short amount of time. Forty percent of that backlog is scheduled to come to fruition over the next two years, which will result in massive growth.

Growth is CoreWeave's fuel, as it is producing no profits, which is my only concern with the stock.

CoreWeave is sparing no expense

CoreWeave is doing what every early-stage company with a massive opportunity should do: expand at all costs. It sees a massive, once-in-a-lifetime market opportunity, and it's sparing no expense to capture every piece of business that it can. It's sacrificing short-term profitability to do this, which isn't out of the ordinary in the tech sector. However, this is a bit different.

Most of the time, you see software companies deploy this technique, as they operate in a low-cost field where their product doesn't depreciate. CoreWeave isn't in the same boat. GPUs and other computing equipment have a finite lifespan, and they are known to burn out after a couple of years of hard use. This means that CoreWeave needs to pump additional capital into the business to keep it running. This could be a problem in the future, as it would have to sustain rapid growth rates for several years to justify this business model.

As a result, the risk of CoreWeave is very high. It could easily reach a steady-state point where it's fully profitable and able to replace equipment as it burns out. At the same time, it's possible that this business model doesn't work out, and it must charge exorbitant rates to customers just for the economics to work. At that point, it may be cheaper for customers to build their own data center versus rent from CoreWeave, and that could spell disaster for the stock.

So, what do I think will happen? I believe we're still in the early innings of artificial intelligence computing build-outs. So, CoreWeave's rapid growth will continue for several years. As a result, its stock will likely continue rising for the time being. However, whether CoreWeave is a long-term success story will be determined by its profitability, and we won't know about that for a few years.

Keithen Drury has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.