CoreWeave Stock Explodes: The AI Infrastructure Play Wall Street Didn’t See Coming

Another day, another moonshot—but this one's got hedge funds scrambling to justify missing the ride.

CoreWeave's shares are staging a gravity-defying rally as the market wakes up to its position as the dirty little secret behind AI's infrastructure boom. The GPU-hoarding upstart turned Nvidia's spare parts into a $12 billion valuation, and now traditional investors are playing catch-up.

Wall Street's usual suspects will spin this as 'fundamentals'—but let's be real. This is what happens when you combine cloud computing's leftovers with the market's current meth-like addiction to anything AI-adjacent.

Big tech is still spending big on AI

andboth recently released their second-quarter earnings reports, showing that their enormous AI-focused capital expenditures (capex) are not slowing down. In fact, they are accelerating. Meta's capex in Q2 nearly doubled year over year while Microsoft's grew by 22% year over year, reaching $17.1 billion. Incredibly, Microsoft told investors it plans to spend $30 billion in Q3, 60% more than analysts expected.

Microsoft's increase is especially important for CoreWeave, not just because of its magnitude, but because Microsoft is by far its biggest customer. There is clearly a demand for AI-optimized cloud computing capacity that, at least at the moment, outstrips big tech's ability to build its own infrastructure.

Citi upgrades CoreWeave stock, but I'm less convinced

analyst Tyler Radke upgraded his rating for CoreWeave stock after Microsoft's earnings made clear there is still enormous and growing demand for what CoreWeave supplies. The analyst upgraded the stock from neutral to buy and set a price target of $160, a significant upside from its current price.

Image source: Getty Images.

While it's clear there is significant demand for CoreWeave's infrastructure right now, I have doubts about its viability long term. Building AI cloud computing infrastructure is enormously expensive, and the company will continue to have to raise funds to expand. It is also enormously expensive to operate, and there is a real question of when -- and frankly, if -- the company can reliably deliver a profit.

Furthermore, while big tech companies are leaning on third parties like CoreWeave at the moment, they are also rapidly expanding their own internal capacities. There is a real risk that over time, they will no longer need CoreWeave. It feels like too shaky of a moat for me, and I WOULD avoid the stock.