CoreWeave shares rise despite downgrade from Bank of America on valuation concerns

CoreWeave (NASDAQ:CRWV) was downgraded to Neutral by Bank of America on Monday, as the bank cited stretched valuation and significant future funding needs despite strong growth and recent contract wins.

“Following Q1 results, the stock has run up 145%. We believe much of the near-term upside has been priced in,” analysts wrote in a note to clients.

The firm noted that CoreWeave now trades at 25 times estimated 2027 EBIT, a premium to peers at 16 times.

Shares of CoreWeave climbed 5.6% on Monday afternoon.

Despite the downgrade, the investment bank raised its price objective on CoreWeave to $185 from $76, pointing to a series of recent positive developments. These include the signing of a new hyperscaler customer, a $4 billion expansion of its agreement with OpenAI, and a debt raise at a lower interest rate.

Still, Bank of America believes much of the near-term upside is already reflected in the share price.

Despite its more cautious stance, Bank of America acknowledged CoreWeave’s strong position in the booming AI infrastructure market. Weekly active users of OpenAI’s ChatGPT—CoreWeave’s largest customer—reached 800 million in May, double the number from February. The company’s contract portfolio also continues to grow, with total value from OpenAI now reaching $15.9 billion.

However, analysts flagged CoreWeave’s significant funding needs as a risk. The company is projected to generate $21 billion in negative free cash flow through 2027, with capital expenditures totaling $46.1 billion over the period. Historically, CoreWeave has funded 85% of its capex through debt.

“In our view, the AI infrastructure capex growth rate is peaking, though still very healthy,” the analysts wrote, adding that access to affordable capital remains crucial.

While CoreWeave recently raised $2 billion at a reduced rate of 9.3%, down from 11% last year, Bank of America noted that this is only a fraction of what will be needed in the coming years.