Untangling CoreWeave

What should we do with CoreWeave CRWV? Is it an investment, a trade ... a potential short?

First, we know that CoreWeave had some serious backing. The short list of huge names begins with high-end AI and cloud chips designer Nvidia NVDA. Jensen Huang's company added to that investment by purchasing $250 million worth of stock at the IPO price of $40 on Monday. Nvidia also happens to be CoreWeave's main supplier and at the moment its second-largest customer. Microsoft MSFT is the company's largest customer, but also a competitor as are Alphabet GOOGL and Oracle ORCL.

Hence, it made sense for Nvidia to take care of itself by taking care of one of its key clients. After the IPO, Nvidia owned 24 million shares of CRWV, including 6 million or one-sixth of the offering, thus supporting the deal at what had become a lower valuation placed on fewer shares. Private equity firm Blackstone BX and hedge fund manager Magnetar have also been huge investors in CoreWeave.

In selling 37.5 million shares on Monday at $40, CoreWeave raised $1.5 billion. That valued it at $23 billion on a fully diluted basis, when considering all shares outstanding. The cash raised does help even if less than previously anticipated. Help with what? Oh, with the $13 billion in debt the company is reported to have outstanding. The debt that apparently got them in trouble late last year.

Red Flag Prior?

News had broken ahead of the IPO last week: The Financial Times had reported that the startup had breached some terms of a $7.6 billion loan last year, triggering a series of defaults, where the company had to ask its largest creditor, the previously mentioned Blackstone to amend the terms of the loan and waive those defaults.

What Does CoreWeave Do?

Simply put, the company is a cloud infrastructure provider. The CoreWeave Cloud Platform consists of software and cloud services that can deliver the automation and efficiency required to manage complex artificial intelligence workloads. These workloads, which include model training and inference, provide clientele with access to advanced GPU and CPU computing, high performance networking and storage. It also provides application software services that are built on top of the company's infrastructure, and managed software, while integrating various technological tools.

Blast Off

On Tuesday, the stock's third day of trade, CRWV ran 41.8% for no obvious or new reason. It had generated $1.92 billion in revenue in 2024, which was up a rough 700% year over year. That said, with customers like Microsoft and Nvidia, a lot of those eggs are in just a few baskets. Personally, I think trading the stock is akin to something close to gambling until we see some kind of trading range or technical pattern develop.

I must admit, when the stock opened on Wednesday morning and ran up to $58 per share on top of Tuesday's run, I was tempted to short the shares. Not only was I tempted, but I also actually tried to short an odd lot to see if I could and I could not get the "borrow." Hence, getting short the name is not yet possible and that should allow for artificially elevated prices to persist for at least a little longer.

Once short sellers are introduced to the marketplace, I would expect that to change. Be careful, though. We already know that Nvidia will defend the stock, and we already know that Blackstone will be lenient as a creditor. Those are some pretty big fish to swim with. This stock is a trader for now and not, in my opinion, an investment idea.

Now, if it were to come in.... I would not mind buying a few shares alongside Jensen Huang. That is something I could do.

At the time of publication, Guilfoyle was long NVDA, MSFT equity.