Buy CoreWeave Stock, Analyst Says. There’s No End in Sight to the AI Boom.

CoreWeave has a $6.3 billion cloud-computing deal with Nvidia. (Yuki Iwamura/Bloomberg)

Key Points

About This Summary

• Raymond James initiated coverage on CoreWeave, rating it Outperform, noting AI spending will continue to increase.
• Raymond James estimates the ‘AI 6’ will spend $900 billion in 2028, while the Street estimate is at $550 billion.
• Citizens JMP upgraded CoreWeave to Market Outperform, citing demand for GPU-as-a-service and Oracle’s record backlog.

There’s no end in sight to the artificial-intelligence spending frenzy, and CoreWeave should take a progressively larger role in the cloud-computing ecosystem, Raymond James says.

The firm’s analysts initiated coverage on CoreWeave stock on Tuesday, rating it Outperform with a $130 price target. In their view, demand for computing power will only continue to ramp up as companies throw more money at AI and the technology catches on with end users themselves. That should benefit CoreWeave, an AI cloud-computing company that provides graphics processing unit (GPU) infrastructure to AI developers.

The Raymond James team contends that AI capital expenditure estimates on Wall Street “appear too low versus our bottom-up build expectations.” The analysts see the so-called AI 6— Amazon.com, Google, Meta Platforms, Microsoft, CoreWeave, and Oracle —spending $900 billion in 2028, versus the Street’s call for $550 billion.

The firm expects the demand for AI chatbots to increase, in turn requiring more computing power. These programs could reach 2 billion daily active users, Raymond James argued. (For reference, OpenAI’s ChatGPT has around 700 million weekly users.)

“The complexity and novelty of building AI Cloud stacks is underappreciated,” analysts wrote. The firm is particularly constructive on CoreWeave’s management team, which is overseen by the company’s four co-founders.

In their view, CoreWeave management has the know-how to oversee various software stack expansion and customer diversification initiatives, helping CoreWeave scale toward $20 billion of annual recurring revenue by 2027.

While the analysts seem confident that the AI boom hasn’t reached its limits, their bear case sees hyperscaler capex peaking in 2026 “as overbuilding fears become more widespread.”

This concern has crept into the market before. In February, TD Cowen noted that Microsoft had canceled leases with at least two data-center operators, sparking broader concerns that tech giants had invested too much, too fast in AI infrastructure.

That’s not to discount Raymond James’s belief that CoreWeave stock could rise 12% from current levels. Shares were down 3.6% at $116.22 on Tuesday, coming off Monday’s highs after the company revealed a $6.3 billion cloud-computing deal with Nvidia.

Also on Tuesday, Citizens JMP upgraded CoreWeave to Market Outperform from Market Perform and set a $180 target price. The firm cited accelerating demand for GPU-as-a-Service, which provides access to graphics processing units over the cloud. The analysts pointed to Oracle’s record backlog for contracted work and Microsoft’s $17 billion dollar deal with Nebius.

Don’t let the recent flood of enthusiasm fool you: Opinions on Wall Street are mixed. Of 27 firms tracked by FactSet, 10 rate CoreWeave stock at Buy or the equivalent, 15 at Hold, and two at Sell.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com