Although recent stock market volatility has pushed down prices for many stocks, the artificial intelligence (AI) sector remains a compelling investment, with the tremendous transformative potential it brings to many industries.
As Lisa Su, CEO of semiconductor giant Advanced Micro Devices, said, "We believe AI is a once-in-a-generation transition that will reshape virtually every portion of the computing market."
A newcomer to the AI space is the recent initial public offering (IPO) CoreWeave (CRWV -11.80%). The company went public on March 28, and AI semiconductor powerhouse Nvidia was among those that bought shares.
CoreWeave provides the cloud computing infrastructure needed by AI systems through a global footprint of 32 data centers. Could this newly public company make a great AI investment for the long haul? Let's dig in to find out.
Although CoreWeave operates in the crowded cloud computing industry, it differentiates its services by catering to the specific technological demands of generative AI. This is the tech that OpenAI's ChatGPT uses, and the one that propelled an AI investment frenzy.
A key point of differentiation from cloud competitors is the company's effectiveness in optimizing AI systems to run on its infrastructure. It does this by focusing on boosting the efficiency of its data centers.
For instance, the company uses liquid cooling systems, which allow it to stack servers closer together than older data centers that rely on air cooling. This means more servers, which translates into more computing power -- and generative AI requires a lot of processing power to produce the humanlike responses seen in systems such as ChatGPT.
CoreWeave began as a cryptocurrency miner, mainly for Ethereum. To do this work, the company gobbled up a ton of semiconductor chips produced by industry leader Nvidia.
But Ethereum changed its data validation system from a mining-based proof of work process to an ownership-related proof of stake design. CoreWeave's revenue potential was adversely affected by this policy change, forcing the company to switch strategies. Since it already had the hardware needed for cloud computing, it transitioned to AI infrastructure.
The company found success in its business transition. In 2024, sales hit $1.9 billion, an incredible 737% increase from the prior year's $228.9 million.
The growth came from capturing key customers like IBM, Facebook parent Meta Platforms, and Microsoft. In March of 2025, CoreWeave also added OpenAI as a customer.
Microsoft adopted the company's technology in 2023, and by 2024, the software titan accounted for 62% of CoreWeave's revenue. In fact, the top two customers contributed 77% of total sales.
The revenue growth comes with a downside: significant capital expenditures. Supplying the hardware needed to power AI systems, such as Nvidia's pricey chips, is not cheap. On top of that, electricity consumption is another substantial cost, and adding to the company's expenses is the fact that it leases the space housing its data centers.
As a result of these massive operating costs, the company exited 2024 with a net loss of $863.4 million. This was a 45% increase compared to 2023's net loss of $593.7 million.
CoreWeave also accumulated an enormous amount of debt to finance building out its AI infrastructure. At the end of 2024, the company said, its total indebtedness was $8 billion.
CoreWeave achieved impressive accomplishments, from its successful AI shift to acquiring customers such as Microsoft and OpenAI. However, this newly public company holds significant risks for investors.
Although it specializes in generative AI infrastructure, it's still competing against the likes of Amazon and Alphabet-owned Google Cloud, which also support AI and more. These larger corporations have the financial strength to continually evolve their hardware.
CoreWeave does not have the deep pockets of those enormous rivals, and instead relies heavily on debt to finance its expenses. The problem is that, as debt increases, so do interest payments. This leaves less income to invest in growing CoreWeave's business, let alone achieve profitability.
Another risk is that the majority of its revenue comes from a single customer, Microsoft. If that company departs, CoreWeave's income crumbles. Unless it can grow its clientele and reduce its reliance on this one customer, the business is vulnerable to this customer concentration risk.
Currently, CoreWeave's downsides outweigh its accomplishments, making this a risky time to invest in this artificial intelligence IPO. The ideal approach is to see how the company performs over the next few quarters.
Look for CoreWeave to expand its customer base and revenue while chipping away at its massive debt before making an investment decision.
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