CoreWeave Shares Tumble. Is the Dip a Buying Opportunity?

Key Points

• CoreWeave is growing its revenue rapidly.

• However, debt is piling up, and the company burns through a massive amount of cash.

• The stock is highly speculative at this point.

• 10 stocks we like better than CoreWeave ›

CoreWeave's (NASDAQ: CRWV) stock has been on a roll since it debuted earlier this year, but shares of the artificial intelligence (AI) infrastructure provider plunged after it reported its Q2 results. The company originally priced its March IPO at $40 and didn't get a big initial pop, actually closing its first day of trading at breakeven. However, the stock later skyrocketed, hitting a high of $187 before pulling back.

Let's take a closer look at the company's recent results and prospects to see if this pullback in a buying opportunity.

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Surging revenue -- and debt

For those unfamiliar with CoreWeave, it is a cloud computing company whose infrastructure is specifically designed to run AI workloads. The company's close relationship with Nvidia gives it access to that company's newest graphics processing units (GPUs). It also provides high-speed networking, storage, and managed software services.

In Q2, the company saw its revenue surge, more than tripling from $395.4 million a year ago to $1.21 billion. That came in solidly ahead of the $1.08 billion analyst consensus, as compiled by LSEG.

CoreWeave also raised its full-year revenue guidance, taking it to a range of $5.15 billion to $5.35 billion. That was a $250 million increase from its prior forecast.

Despite the huge revenue growth, CoreWeave said that it continues to experience supply constraints with demand for its product and services far outstripping supply. The company is investing significantly to increase its capacity, with capital expenditures (capex) forecast to be between $20 billion and $23 billion this year. However, it said its biggest challenge is getting enough access to powered shells, which are data center facilities with a grid connection.

This is one reason why CoreWeave is in the process of trying to acquire former Bitcoin miner Core Scientific for $9 billion in an all-stock transaction. The deal will give it control of extensive power infrastructure and a pipeline of contracted power.

While CoreWeave is growing rapidly and seeing strong demand, it's also piling up debt as it builds out its infrastructure. It ended the quarter with $11.2 billion in debt and just $1.2 billion in cash.

At the same time, it's been burning through a ton of cash. Its operating cash flow was negative $251.3 million in the quarter and negative $190.1 million in the first half. Meanwhile, free cash flow was negative $2.7 billion for the quarter and negative $4.1 billion through the first six months of the year. And with the company set to spend more than $16 billion in capex in the second half, its debt load is only going to grow significantly.

Image source: Getty Images.

Should investors buy the dip?

CoreWeave is growing rapidly, and the company says its AI infrastructure is able to handle both AI training and inference workloads. That's important, as there is expected to be an eventual shift more toward inference.

It's an AI infrastructure leader for AI start-ups, but it's also signed expansion agreements with its two important hyperscale customers, one of which is OpenAI, and it's seeing increasing demand from companies in non-tech sectors. With demand currently outstripping supply, growth is not a problem.

The bigger question is whether the company is getting enough bang for its buck with its spending. Debt is piling up, as are interest expenses. The company recently significantly reduced its financing costs, but its debt costs are still not cheap. Meanwhile, profitability looks far off, and the company will need to continue to spend big in order to grow.

While cloud computing can be a great business, CoreWeave does not have the luxury of the big three players -- Amazon, Microsoft, and Alphabet -- which have both scale and other strong businesses to provide the cash flow to cover their data center buildouts.

The stock remains highly speculative at this time. I'd personally stay on the sidelines.

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Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.