CoreWeave (CRWV) stock plunged about 8% in Wednesday’s extended trading session, as the company’s steep capital spending plan reversed the initial rise in its shares and overshadowed the market-beating Q1 revenue. CoreWeave, which is backed by semiconductor giant Nvidia (NVDA) and offers GPU (graphic processing unit) infrastructure for AI (artificial intelligence) workloads, expects full-year capital spending in the range of $20 billion to $23 billion, way higher than the Street’s consensus of $18.4 billion.
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CoreWeave’s CapEx Plans Weigh on Investor Sentiment
In the first quarterly results after its IPO (initial public offering) in late March, CoreWeave revealed a stellar 420% jump in its Q1 revenue to $981.6 million, crushing analysts’ estimate of $853 million. This sparked a 10% jump in CRWV stock initially in Wednesday’s after-hours trading session.
However, the rally didn’t last long, as the company disclosed its significant capital spending plan for the full year to support “increased and accelerated investment” in its platform to meet customer demand. The company also expects high capex for the second quarter in the range of $3 billion to $3.5 billion amid robust demand for its offerings. Further, management stated that stock-based compensation is expected to remain slightly elevated through 2025 due to the grants issued in connection with the IPO.
Emphasizing the demand for its cloud-based platform, CoreWeave disclosed its strategic deal with ChatGPT-maker OpenAI, with a contract value of up to $11.9 billion, the addition of new enterprise customers and a new hyperscaler, and the expansion of agreements with many large customers, including a recent $4 billion expansion with a large AI enterprise.
CoreWeave Stock’s Movement
CoreWeave rents out access to Nvidia’s GPUs to customers and boasts of clients like Alphabet’s (GOOGL) Google and Microsoft (MSFT). It competes with cloud providers like Amazon (AMZN). The company is focusing on diversifying its business to reduce the risk of dependence on a small number of big clients.
While CRWV stock has jumped notably since its debut, there have been concerns about further upside due to the uncertainty around AI demand amid macro challenges.
