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 CoreWeaveโs strong position in the rapidly growing AI infrastructure market as a reason for their bullishness.
โCoreWeave 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 CoreWeaveโs heavy dependence on a small number of clients and the challenging broader market environment.
โVolatile macro (and equities) backdrop may limit investorsโ willingness,โ Morgan Stanley noted, assigning an โequal-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 Microsoftโs 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 CoreWeaveโs standing, it also heightens customer concentration risks.
โClose relationship with Microsoft and OpenAI could cut both ways,โ Barclays analysts said, adding, โcustomer concentration here does pose a risk.โ
J.P. Morgan cautioned that CoreWeaveโs debt-fueled, capital-intensive business model could lead to a โwild, 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 Chinaโs 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 todayโs uncertain economic climate.
