CoreWeave falls 52% as debt costs and Meta Compute threaten AI cloud model

CoreWeave's $99.4 billion revenue backlog has not stopped its stock from losing half its value as investors focus on the cost of building data centers needed to fulfill those contracts.

CoreWeave closed Thursday at $72.91, down 52% from its 52-week high of $153.20 and 35% in the past month alone. The AI cloud provider's first-quarter results laid bare the tension at the heart of its business model: revenue surged 112% year over year to $2.08 billion, but interest expense more than doubled to $536 million, widening the net loss to $740 million from $315 million a year earlier.

"The market is repricing the risk that CoreWeave's debt-funded growth model may not scale to profitability before competition intensifies," John McPeake, an analyst at Rosenblatt Securities who reiterated his street-high $250 price target on the stock, said. McPeake's target implies roughly 243% upside from current levels, making him the most bullish of the 37 analysts covering the company, 24 of whom rate the stock Buy or Strong Buy.

The selloff accelerated this month after Bloomberg reported that Meta Platforms, CoreWeave's largest customer with a $21 billion contract through 2032, is planning a commercial cloud service called Meta Compute that would sell surplus AI computing capacity to enterprise clients — directly competing with CoreWeave's core business. Meta also raised its 2026 capital expenditure guidance to as much as $145 billion, reinforcing a "build, don't rent" posture that threatens the neocloud model. The broader AI infrastructure sector sold off in sympathy, with Applied Digital falling 43% and IREN dropping 41% over the same period.

The Debt Burden Behind the Backlog

CoreWeave's $99.4 billion contracted revenue backlog, which management called the strongest bookings quarter in the company's history, represents future cash flow from customers including Meta and OpenAI. But converting that backlog into profit requires massive upfront spending. The company spent $7.7 billion on capital expenditures in the first quarter alone, while free cash flow came in at negative $4.7 billion. CoreWeave's active power capacity reached 1 gigawatt in the first quarter, and management targets more than 8 gigawatts by 2030 — a buildout that will require continued heavy borrowing.

CEO Michael Intrator sold roughly $56 million in shares in early July through a prearranged trading plan, adding to the bearish sentiment. A securities fraud class action lawsuit also remains outstanding against the company.

The Meta Compute Overhang

McPeake's bull case rests on a contractual firewall: the terms of Meta's $35.2 billion agreement reportedly prevent Meta from reselling or subleasing any GPU capacity it rents from CoreWeave, meaning Meta Compute cannot directly cannibalize CoreWeave's owned capacity. He argues Meta's cloud initiative is a utility optimization play to monetize idle internal clusters rather than a predatory move against specialized neoclouds.

Still, the risk is structural. If hyperscalers like Meta and Amazon increasingly build in-house GPU capacity rather than renting from third parties, CoreWeave's addressable market could shrink even as its backlog grows. The company's path to profitability depends on interest costs growing far more slowly than revenue — a dynamic that showed no sign of materializing in the first quarter.

CoreWeave shares trade at roughly 35 times trailing revenue, a premium that reflects the backlog's size but leaves no room for execution missteps. The consensus price target of $141.15 implies 94% upside, but the stock has moved 15% in a single week in either direction recently, a reminder of the volatility baked into the AI infrastructure trade. The next catalyst may come from hyperscaler earnings commentary on whether the industry's capex cycle is peaking or still accelerating.

This article is for informational purposes only and does not constitute investment advice.