CoreWeave has announced an ambitious plan to invest between $20 billion and $23 billion into GPU infrastructure by the end of the year to meet the increasing demand from model builders and hyperscalers. The company’s announcement, coupled with new commitments from OpenAI and undisclosed hyperscale customers, is intended to reassure stakeholders about its long-term growth prospects. However, these financial commitments highlight the precarious nature of CoreWeave’s business model, especially given the recent surge of 420 percent in its Q1 year-over-year revenues to $982 million, which, nonetheless, resulted in a net loss of $314.6 million.
Looking forward, CoreWeave projects Q2 revenues between $1.06 billion and $1.1 billion, with overall annual revenues expected to range from $4.9 billion to $5.1 billion. This growth isn’t expected to sustain the planned high level of investment. Unlike larger hyperscalers such as Microsoft, which can comfortably invest in AI infrastructure, CoreWeave operates with a debt-laden strategy, having raised nearly $17.2 billion through various funding routes, including its IPO, and currently holds around $9 billion in debt.
CoreWeave’s approach has drawn comparisons to a real estate investment trust (REIT), but the difference lies in the technology lifecycle. While real estate typically appreciates in value, GPUs are seen as depreciating assets, losing value rapidly as newer generations are released. This places CoreWeave in a vulnerable position, as its financial model relies heavily on securing long-term lease agreements to offset operational costs.
The company is banking on long-term contracts with major players such as OpenAI, Microsoft, Google, and IBM. Notably, Microsoft currently accounts for a staggering 62 percent of CoreWeave’s revenues. There’s a risk, however, that as these companies expand their own data center capacities, they may reduce their reliance on CoreWeave’s services. This is particularly concerning given the rapid pace of AI adoption observed in the market, with projections estimating the market could flourish into a $400-$500 billion sector by 2028.
Currently, CoreWeave appears to be in a position to meet its obligations, bolstered by a reported revenue backlog of $25.9 billion. However, concerns loom about sustainability and the possibility of losing major customers whose contracts could conclude in the coming years. The ongoing interest in AI and its potential growth could serve as a beacon of hope for CoreWeave’s future, especially if the enterprise adoption of AI technology accelerates as expected.