The demand for artificial intelligence infrastructure has been nothing short of relentless, driving significant investment from companies like Coreweave. Despite a recent slump in its stock price, CEO Mike Intrator remains steadfast in his strategy, emphasizing a “once in a generation moment” for capacity demand. This aggressive expansion, however, has inevitably led to concerns about profitability and the company’s debt-laden business model.
Coreweave, which specializes in renting out advanced AI chips, primarily Nvidia’s, to a select group of hyperscalers and AI pioneers such as Microsoft and OpenAI, is pouring substantial capital into building out its infrastructure. Intrator acknowledged the market’s apprehension regarding the company’s massive capital allocation but pointed to an “enormous” backlog as justification for the spending. “We’ve willingly chosen to invest in more infrastructure and take a margin hit to meet this moment,” he stated in a recent interview.
The company’s stock experienced a significant decline following its latest earnings report, largely due to disappointing revenue guidance and ambitious spending plans for 2026. Coreweave projects an investment of $30 billion to $35 billion next year, significantly exceeding analyst estimates and fueling worries about its long-term financial sustainability.
A key aspect of Coreweave’s model is its reliance on debt financing for its substantial hardware acquisitions. This, coupled with its concentrated customer base, has drawn scrutiny from investors and analysts alike.
Despite these concerns, Intrator expressed optimism regarding the cost of capital. He countered the narrative of rising borrowing costs by highlighting a significant decline in Coreweave’s own cost of capital. “Our cost of capital over the last 12 months has come down 300 basis points,” he reported, translating to approximately $700 million in savings based on the company’s debt load. He further noted a 600 basis point reduction over the past two years.
Looking ahead, Wall Street analysts anticipate a period of volatility for Coreweave. The aggressive infrastructure build-out is expected to continue pressuring margins and increasing operational costs. Analysts at Barclays suggest that the stock may trade sideways as investors digest the implications of Coreweave’s spending strategy. Meanwhile, JPMorgan analysts cautioned that heightened economic uncertainty could disproportionately impact Coreweave’s shares due to a potential flight to safety by investors.
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