CoreWeave is Joining the Nasdaq-100. Is the Stock a Buy?

CoreWeave (NASDAQ: CRWV) is playing a key role in the artificial intelligence (AI) revolution, and that's helped the stock soar 194% from its initial public offering a little over a year ago. This tech company offers something crucial: access to high-powered compute. Customers have flocked to CoreWeave for this, sending revenue to triple-digit gains.

And now, CoreWeave is scoring yet another victory. As of June 22, the AI stock joins the Nasdaq-100. Is now, as the company reaches this milestone, a good moment to buy CoreWeave? Let's find out.

Image source: Getty Images.

CoreWeave and Nvidia

So, first, let's talk a bit about CoreWeave. The company offers access to compute, but not just any AI chips -- it's developed a close relationship with AI chip leader Nvidia and has established a massive fleet of the company's top graphics processing units (GPUs). In fact, CoreWeave was the first to make Nvidia's Blackwell and Blackwell Ultra systems generally available and expects to be among the first to deploy the upcoming Vera Rubin platform, too.

And this relationship isn't one-sided. Nvidia has shown its confidence in CoreWeave by investing in the company -- it currently owns more than 47 million shares, making CoreWeave the second-biggest position in its investment portfolio. And Nvidia has agreed to purchase any excess compute CoreWeave is unable to sell through 2032. All of this suggests that Nvidia is optimistic about CoreWeave's prospects. Considering Nvidia's dominance in and understanding of the AI market, a vote of confidence from the company is a very good sign.

CoreWeave, as a cloud provider, faces competition from market giants such as Amazon, Microsoft, and others. But the company stands out because it focuses specifically on AI workloads, while those tech powerhouses offer a broader platform. This specialization in AI could offer CoreWeave a certain advantage.

Deals with Meta and Anthropic

As mentioned, CoreWeave is delivering impressive earnings growth. The company has reached a key milestone, with contracted order backlog reaching almost $100 billion. CoreWeave also has added new orders from Meta Platforms and signed on Anthropic as a customer for the first time -- Anthropic aims to access GPUs for the development and use of AI model Claude. CoreWeave also is seeing an increase in customer diversification with 10 customers that aim to spend at least $1 billion with the company.

Now, let's consider the CoreWeave addition to the Nasdaq-100. The company has been selected to join this index of the biggest non-financial companies on the Nasdaq. This movement, set to happen prior to the market open on June 22, should offer the stock a boost in the near term -- this is as funds that track the Nasdaq-100 buy the shares so that they can continue correctly replicating the index's performance.

Does this make CoreWeave stock a buy? If you already own CoreWeave stock, you'll clearly be happy to see any positive momentum sparked by this entrance into the Nasdaq-100. But I wouldn't specifically buy the stock just to get in on this near-term boost. That's because, over the long-term, it won't impact your returns by very much.

What type of investor may consider CoreWeave?

So I wouldn't buy CoreWeave specifically for this reason right at this moment. But I would consider buying the stock for the company's growth so far and the likelihood that this momentum may continue. It's important to note that CoreWeave probably isn't the best choice for a cautious investor -- the company is highly leveraged, relying heavily on debt to grow. Though this is necessary right now, it still represents risk.

That said, CoreWeave today makes an interesting investment for the more aggressive investor who doesn't mind this risk. The company has a strong relationship with chip giant Nvidia, and Nvidia is on track to roll out Rubin, its latest GPU update, in the second half of this year -- this could translate into growth for CoreWeave. I also like the fact that the contracted backlog has reached a significantly high level and that CoreWeave's investments are to support this concrete demand.

All of that could make CoreWeave, this new Nasdaq-100 stock, a compelling buy.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.