CoreWeave (CRWV), operating as the “AI Hyperscaler,” has filed its S-1 for an initial public offering (IPO) led by JP Morgan, Morgan Stanley and Goldman Sachs. It is seeking a valuation of roughly $35 billion or 21x EV to 2024 revenue, a steep increase from the reported $23 billion range for its November funding round. Despite the meteoric growth, there are several red flags warranting a cautious approach to evaluating its long-term sustainability.

CoreWeave pivoted in 2019 from being a crypto mining company to offering cloud access to its GPUs, culminating in its 2020 launch of the CoreWeave Cloud Platform. Through a close relationship with Nvidia, supported by an investment, they could secure highly sought-after NVDA GPUs and quickly bring them to market for customers.

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Strengths:

  1. Robust Revenue Growth:
    • The company’s revenue surged from $16 million in 2022 to $229 million in 2023, and further to $1.9 billion in 2024, marking an eightfold increase this past year alone. 
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  2. Long-Term Contracts:
    • CoreWeave has secured substantial long-term (typically 2 to 5 years, weighted average of 4 years), take-or-pay contracts with major customers, providing revenue visibility and stability. They have $15.1 billion in Remaining Performance Obligations at year-end 2024 which grew 53% year over year. 
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  3. AI Native Cloud Infrastructure:
    • CoreWeave was purpose-built for the AI cloud. They cite 8- 10x faster container spin-up times vs. the general CSPs and 3- 5x faster download speeds. They claim to address the MFU “Efficiency Gap” far better than general Cloud Service Providers (i.e., AWS, GCP, Azure). The MFU Efficiency Gap refers to the large loss of compute capacity from GPUs due to system efficiencies. (see their table below)
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Now, let’s explore the many red flags that should have any investor dig deeper. 


Red Flags:

  1. Customer Concentration Risk:
    • CoreWeave’s revenue dependency on Microsoft (MSFT) has skyrocketed to 62% in 2024, up from 35% in 2023 and just 16% in 2022. This dramatic increase coincides with the surge in demand for Nvidia GPUs driven by the ChatGPT boom. However, Microsoft CEO Satya Nadella has downplayed long-term exclusivity, calling it a “one-time thing” in a podcast interview cited by The Information. CoreWeave’s revenue could be severely impacted if Microsoft shifts its AI strategy.

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  2. Capital Intensity and Debt-Fueled Expansion
    • CoreWeave operates 32 data centers that house over 250,000 Nvidia GPUs, requiring significant capital investment. In 2024, capital expenditures surged 180% year-over-year, primarily funded by debt. The company’s operating costs totaled $1.6 billion, with technology and infrastructure expenses rising 629% year-over-year to $960 million. Given the capital intensity of scaling AI cloud services, sustained profitability remains uncertain.
  3. Heavy Insider Selling Pre-IPO
    • In November 2024, CoreWeave’s three co-founders—CEO Michael Intrator, CSO Brian Venturo, and CDO Brannin McBee—sold a combined $250 million in stock, despite the company being only months away from an IPO. Such large insider sales raise concerns about management’s confidence in the long-term upside.
  4. Material Weakness in Internal Controls
    • CoreWeave disclosed a material weakness in its internal controls over financial reporting, citing gaps in key accounting personnel and IT automation. While the company is actively hiring and investing in remediation, it expects these weaknesses to persist until at least 2026, raising potential financial oversight concerns as the business scales.


 We may not be able to fully remediate these material weaknesses until these steps have been completed and the internal controls have been operating effectively for a sufficient period of time. This evaluation process, including testing the effectiveness of the remediation efforts, is expected to extend into 2026.  (CoreWeave S-1)

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Final Thoughts: Balancing Opportunity with Risk

CoreWeave’s unprecedented growth in AI cloud computing and long-term contracts position it as a formidable player in the sector. However, its high customer concentration, capital-intensive model, insider selling, and financial controls issues present notable risks. Investors must weigh the upside of AI-driven demand against the vulnerabilities in CoreWeave’s business model.

Investors can utilize Daloopa’s detailed data sheets to conduct a deeper analysis and build their own financial models, enabling them to get up to speed quickly and make informed investment decisions.