Wall Street Brokerages Launch Bullish Coverage of CoreWeave Despite Lackluster Market Debut

Wall Street Brokerages Launch Bullish Coverage of CoreWeave Despite Lackluster Market Debut

by Reuters News Service
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Wall Street brokerages kicked off coverage of Nvidia-backed CoreWeave (CRWV.O) earlier this week with broadly optimistic views, though the stock has struggled to gain traction following a muted initial public offering and market debut.

Among the 13 major firms initiating coverage, Needham and Stifel posted the highest price targets at $55, while Melius Research set the lowest at $40. Despite an IPO pricing at $40, CoreWeave shares were last up 6% to $37.58, still below their offering price.

Following the expiration of the industry-mandated quiet period, brokerages cited CoreWeaveโ€™s strong position in the rapidly growing AI infrastructure market as a reason for their bullishness.

โ€œCoreWeave exhibits a track record of being first to deploy next-gen GPUs, making it difficult for other hyperscalers to claim industry leadership,โ€ J.P. Morgan wrote in its coverage note.

Based in Livingston, New Jersey, CoreWeave provides access to data centers equipped with highly sought-after Nvidia (NVDA.O) chips, crucial assets in the increasingly competitive AI development race.

Risks Temper Optimism

Despite the enthusiasm, analysts expressed concerns over CoreWeaveโ€™s heavy dependence on a small number of clients and the challenging broader market environment.

โ€œVolatile macro (and equities) backdrop may limit investorsโ€™ willingness,โ€ Morgan Stanley noted, assigning an โ€œequal-weightโ€ rating to the stock.

In 2023, CoreWeave generated 77% of its revenue from just its top two customers โ€” one of which was Microsoft (MSFT.O). Citigroup, which launched coverage with a “neutral” rating, flagged Microsoftโ€™s recent indications of a slowdown in AI spending as a potential headwind.

The company recently signed a landmark $11.9 billion, five-year deal with OpenAI, Reuters reported, cementing a close alliance with the prominent AI startup. While this deal strengthens CoreWeaveโ€™s standing, it also heightens customer concentration risks.

โ€œClose relationship with Microsoft and OpenAI could cut both ways,โ€ Barclays analysts said, adding, โ€œcustomer concentration here does pose a risk.โ€

J.P. Morgan cautioned that CoreWeaveโ€™s debt-fueled, capital-intensive business model could lead to a โ€œwild, lumpy, volatile ride,โ€ potentially testing investorsโ€™ risk tolerance.

Broader IPO Market Remains Fragile

The IPO was underwritten by a syndicate of 18 banks led by Morgan Stanley, J.P. Morgan, and Goldman Sachs, and was viewed as a key test of investor appetite for new public listings and AI-related stocks โ€” particularly against the backdrop of Chinaโ€™s DeepSeek launch and Trump-era tariffs.

The broader recovery of Wall Street IPOs remains uneven. Venture Global (VG.N), a liquefied natural gas exporter, has struggled since its market debut in January, reflecting the fragility of investor sentiment in todayโ€™s uncertain economic climate.

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