CoreWeave's Soaring AI Demand Fails to Compensate for Data Center Setbacks and Mounting Debt

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CoreWeave's Soaring AI Demand Fails to Compensate for Data Center Setbacks and Mounting Debt

Bitget-RWA2025/11/17 12:32

By:Bitget-RWA

- CoreWeave's stock fell nearly 30% in early November after cutting its 2025 revenue forecast due to data center construction delays. - The company faces rising debt costs and a $4.75B cash burn, despite a $55.6B revenue backlog from clients like Meta and OpenAI. - Analysts are divided: some see a buying opportunity in its AI infrastructure demand, while others warn of structural risks and execution challenges. - Management claims delays are temporary, but critics question the sustainability of its capital

Shares of CoreWeave (CRWV) tumbled close to 30% in early November after the AI cloud company lowered its revenue outlook for 2025, even though it delivered outstanding results for the third quarter. The stock, now trading well below its 52-week peak, has sparked a split among analysts—some see the drop as a chance to buy, while others caution about fundamental risks tied to the firm’s capital-heavy operations

as noted by Charlie Munger

The company posted third-quarter revenue of $1.365 billion,

beating projections by $65 million

and representing a 134% increase from the same period last year. Adjusted EBITDA hit $838 million, and the revenue backlog soared to $55.6 billion,

up 85% from the previous quarter

. Despite these strong numbers, leadership cut its 2025 revenue projection to between $5.05 billion and $5.15 billion, down from $5.35 billion, blaming construction delays at a key data center partner. This setback

pushed revenue recognition into later periods

, fueling worries about the company’s ability to execute.

CoreWeave's Soaring AI Demand Fails to Compensate for Data Center Setbacks and Mounting Debt image 0

The steep drop in share price came after J.P. Morgan downgraded the stock from Overweight to Neutral, with analyst Mark R. Murphy pointing to supply chain issues and higher debt costs.

CoreWeave’s interest payments tripled

to $311 million in the third quarter, up from $104 million in 2024, while operating margins shrank to 16% from 21% a year ago. Several major investors have also reduced their holdings, including

Coatue Management, which slashed its stake

by 62% in Q3 and

Soros Fund Management, which completely exited

its investment.

Despite recent setbacks, the company’s long-term outlook is supported by a substantial backlog of multi-year agreements. Meta Platforms and OpenAI have pledged $14.2 billion and $22.4 billion, respectively, while Nvidia has committed to $6.3 billion in capacity through 2032

according to industry analysts

. Some analysts, such as HC Wainwright’s Kevin Dede, believe the market reaction is excessive, stressing that the delays are only temporary and that demand for AI infrastructure remains “consistently strong.” The company’s ongoing data center buildout,

spanning 32 sites with 2.9 gigawatts

of contracted power, is projected to fuel future expansion.

On the other hand, critics point to the company’s financial pressures.

CoreWeave

used up $4.75 billion in free cash flow in the first nine months of 2025, mostly financed by $4.5 billion in new debt. With a market value of $39 billion and a forward price-to-sales ratio of 7.8, the stock is priced higher than its peers, even as losses persist.

Analyst opinions remain split

: 13 out of 26 rate it a Buy, while 12 recommend Hold or Sell.

CoreWeave’s leadership maintains that the challenges are “isolated and short-term,” expecting delays to resolve by early 2026

according to company statements

. Still, as one Seeking Alpha writer observed, the company’s dependence on rapid, high-cost investments to stay ahead in the AI sector raises doubts about its long-term viability. For now, investors must balance the potential of AI-fueled growth with the risks of a business model that requires constant, heavy reinvestment.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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