Ark Investment buys CoreWeave on dips. Should investors follow suit?

AI Cloud Infrastructure Provider CoreWeave (CRWV) went public last March, with an offering price of $40 per share. It briefly soared to around $185 but then quickly retreated from its high. Despite this, since its IPO, the stock has gained over 140%, and as of press time, the share price has reached $96.79. Ark Invest bought CoreWeave shares on the dip last week, adding them to two of its flagship funds. Should investors follow suit?

Cathie Wood Buys CoreWeave and Adds It to Ark’s Flagship Funds

Ark Invest has included CoreWeave’s stock in the Ark Innovation and Ark Next Generation Internet funds, indicating institutional confidence in the ongoing demand for AI infrastructure. If CoreWeave’s revenue meets expectations and its price-to-sales ratio rises to about five times, its market cap could approach $100 billion by early 2027. After going public in March last year, the stock surged over 140% within a few months. Although it has since pulled back, the company benefited from investing $100 million in NVIDIA’s (NVDA) H100 GPUs as collateral, which enabled additional financing.

CoreWeave Holds NVIDIA H100 Cards and Rapidly Expands AI Data Centers

Originally an Ethereum (ETH) miner, CoreWeave shifted to providing remote AI computing services via GPUs after the cryptocurrency market downturn in 2018. In 2022, it invested approximately $100 million to purchase NVIDIA H100 GPUs and used related equipment as collateral to secure financing for expanding its data centers and hardware capacity. Data shows that CoreWeave’s data centers have grown from 3 at the end of 2022 to 33 across the U.S. and Europe.

As AI application demand heats up, CoreWeave’s revenue grew from $16 million in 2022 to $1.9 billion in 2024. Analysts estimate it could reach $5.1 billion in 2025 and turn profitable around 2027. Growth is mainly driven by collaborations with major clients like Microsoft and OpenAI for AI infrastructure. However, about 70% of revenue is still concentrated with a single customer, indicating a highly concentrated revenue structure. The company expects that as it scales, operating costs will decrease and gross margins will improve, but actual results remain to be seen over time.

What Will Be the Stock Price Trend for CoreWeave in the Next 12 Months?

The Motley Fool analysts believe there are three major potential downside factors that could lower CoreWeave’s valuation. First, approximately 70% of its revenue still comes from Microsoft. Second, to expand, CoreWeave might issue more shares and take on additional debt. Lastly, its failed acquisition of Core Scientific (CORZ) last year, valued at $9 billion, has put pressure on its valuation. In other words, CoreWeave has yet to prove the sustainability of its business model.

If CoreWeave’s performance aligns with recent analyst expectations and its price-to-sales ratio reaches 5, its market cap could more than double by early 2027, reaching $98 billion. This would be an impressive 12-month increase, but heightened competition, higher-than-expected costs, or a slowdown in corporate AI spending could all exert downward pressure on its stock.

CoreWeave provides clients with capacity for AI workloads, which is a rapidly growing market segment. Its business model of leasing NVIDIA GPUs allows customers to avoid building their own infrastructure, fueling strong growth—quarterly revenue recently soared into triple digits. Due to high demand, large-scale infrastructure investments are necessary to meet market needs. Concerns over high expenditures caused the stock to plunge significantly, and these risks remain. Ark Invest views this dip as a great investment opportunity, and other active investors might consider it as well. Note: This is purely market observation, not investment advice.

This article about Ark Invest buying CoreWeave on the dip—should investors follow? First published on Chain News ABMedia.