Ben Reitzes says that CoreWeave Inc. (NASDAQ:CRWV) is not the best option for investing in AI infrastructure. Ben Reitzes is a senior researcher at Melius Research.
In an interview today with CNBC, Mr. Liu said that Nvidia or Broadcom are two other options which offer greater stability and cleaner performance than CRWV.
Reitzes made his remarks a day before CoreWeave announced a revenue growth of more than 400% on a year-on-year basis, to $982 million in Q1.
The price of CRWV is nearly double what it was on April 21, .
Reitzes is cautious about CoreWeave stocks.
The Melius analyst said that CoreWeave was a name to watch, as it is a company that benefits from the continued demand for AI Infrastructure.
He added that for anyone interested in getting a meaningful amount of exposure into this market, “it doesn’t get any better” than NVDA or AVGO.
Reitzes praised Jensen Huang as an “excellent operator” in the interview. He also said that both companies had strong and well-diversified revenue streams, which warranted investment.
Nvidia has secured recent multi-year contracts from Saudi Arabia, the United Arab Emirates, and other countries that provide even more visibility on its future growth.
AI is down about 10% from its high for the year.
CRWV anticipates negative cash flows of $19 billion
CoreWeave expects to see its revenues more than quadruple to $5 billion in this year, but that will come with a price.
Michael Intrator is the chief executive of the company. According to him, capital expenditures are likely to fall between $20 and $23 billion. This will result in a negative cash flow (negative free cash flow) of $19 billion by 2025.
Ben Reitz, in an interview on CNBC, said that the AI infrastructure company’s capital spending plans heavily rely on terminal growth. But “you don’t really know” whether this growth will materialize.
CoreWeave’s first-quarter net loss was $315,000,000, a more than twofold increase. This represents a 32% net loss margin.
Nvidia, Broadcom Inc. and CRWV are better choices to invest in AI infrastructure in 2025 than CRWV.
CRWV does not have diversified revenue streams
CoreWeave’s over-reliance on one client is another significant issue.
Microsoft is expected to account for approximately 62% of revenue in 2024.
The artificial intelligence company, OpenAI, signed a 5-year contract with the company in the first quarter of this year. It was worth approximately $12 billion.
Melius Research has set a price target of $67 on the CRWV share, roughly equal to its current price.
Melius is not the only Wall Street analyst who shares Melius’ caution about CoreWeave.
The consensus rating for the AI stock is currently “overweight”, but the average target price of $60 suggests that the AI share could fall more than 10 percent from this point.
The post CoreWeave’s explosive growth does not make it the most AI-based infrastructure play. may change as new updates are released.
