AI unicorns face high leverage challenge Bank of America downgrades CoreWeave (CRWV.US) to “hold”

The Zhitong Finance App learned that the AI infrastructure company CoreWeave (CRWV.US) stock price has soared by more than 145% since it went public in March, but this rapid rise has also triggered analysts to be wary of its valuation and financial structure. Bank of America released a report on Monday to downgrade CoreWeave's stock rating from “buy” to “hold” while drastically raising its target price from $76 to $185.

“Since the announcement of the first quarter earnings report, CoreWeave's stock price has increased cumulatively by 145%. We believe that its short-term upside has basically been digested by the market.” Bank of America analyst Brad Sills wrote in the report.

This combination of “downgrading+target price increase” highlights the contradictions and challenges analysts face when dealing with “emerging hot stocks.” CoreWeave's March IPO was priced at $40. Currently, the stock price is about $157, which is far higher than the Wall Street analysts' average target price of $73, and the target price range is between $36 and $185.

CoreWeave is an infrastructure provider focusing on artificial intelligence cloud computing. Its main business is leasing cloud servers based on Nvidia (NVDA.US) AI accelerators to customers. Its largest customer was Microsoft (MSFT.US), which accounted for 72% of the company's first-quarter revenue. In addition, CoreWeave also reached a new cooperation agreement with OpenAI and Google, a subsidiary of Google's parent company Alphabet (GOOG.US, GOOGL.US), to reserve healthy orders.

As demand for generative AI and large model training continues to soar, the market demand for AI cloud computing continues to rise and supply is in short supply. This market structure has also become the foundation for CoreWeave to achieve rapid revenue growth. In the first quarter of this year, the company's revenue increased by 420% year over year.

However, behind the rapid growth is heavy capital investment and debt burdens. In order to maintain the pace of expansion, CoreWeave needed continuous financing, purchase more AI servers, and build data centers, which also put pressure on its financial reports.

In the first quarter of 2025, the company's total cost of interest and depreciation expenses accounted for 72% of revenue, ultimately leading to a net loss of US$269 million before taxes. Among them, interest expenses reached US$264 million in a single quarter.

To supplement capital, the company issued $2 billion in senior notes in May, with coupon interest rates as high as 9.25%, adding an additional $46 million in interest burdens for the quarter. Analysts pointed out that although the issuance of new bonds has brought some relief, “this only accounts for a small portion of the company's future incremental financing needs, and it still raises many questions.”

As of the end of March, CoreWeave's total debt had reached US$8.7 billion. According to the company's plan, capital expenditure of US$18 billion to US$21 billion will be added in 2025, and it will also need to repay US$3.8 billion of maturing debt by March 2026.

Sills emphasized in the report: “The company's ability to obtain low-cost financing will be the key to the success or failure of future expansion.” In the current interest rate environment, if CoreWeave cannot effectively reduce financing interest rates, it may be difficult to suppress gradually rising interest costs, which will affect its growth rate and profit expectations.