Stock Price Plunges Yet Still Supported! Bank of America Maintains "Buy" Rating on CoreWeave (CRWV.US): Don't Be Scared by Financing Concerns, Backlogged Orders Still at Least $129 Billion

According to Zhitong Finance APP, after concerns over AI infrastructure financing led to a cumulative decline of about 18% in CoreWeave's stock price over two consecutive trading days, Bank of America on Thursday reiterated its "Buy" rating on CoreWeave and raised its revenue forecasts. Coupled with market recovery, CoreWeave rebounded nearly 6% on Thursday, closing at $69.69.

Bank of America analyst Tal Liani stated in the report that CoreWeave's share price drop likely reflects market concerns over financing obstacles faced by AI infrastructure participants. However, Bank of America is maintaining its $140 price target, which is based on 26 times CoreWeave's estimated 2027 operating profit—higher than the 14 to 19 times valuation range Bank of America applies to other cloud data center companies, due to CoreWeave’s faster anticipated growth.

Bank of America also comprehensively raised its financial forecasts: CoreWeave's revenue is expected to increase by 105% in 2027 and by 63% in 2028, up from the previous forecasts of 102% and 58%, respectively; corresponding to projected 2027 revenue of $26.5 billion and 2028 revenue of $43.3 billion, both higher than the previously forecasted $26 billion and $41 billion; 2026 revenue is estimated to be $12.9 billion.

On the operational side, Bank of America expects that CoreWeave will add 1.4 to 1.5 gigawatts of active power capacity annually over the next two years. As the company begins to use Nvidia (NVDA.US)’s next-generation Vera Rubin chips, revenue per megawatt is expected to rise from the current approximately $10 million to about $14 million by the end of 2028.

But expansion also means higher capital expenditures. Bank of America raised its CoreWeave spending forecasts for 2027 and 2028 to $47.4 billion and $49.8 billion, up from the previous $43.8 billion and $44.7 billion. The bank estimates that CoreWeave’s cash outflows this year will exceed cash inflows by about $23.8 billion, and by about $24.8 billion in 2027; by the end of 2026, the company’s debt level is expected to be roughly three times shareholders' equity.

Bank of America's optimistic view on CoreWeave is partly due to its contract backlog. CoreWeave's signed contract backlog is at least $129 billion, with most clients being large tech companies with strong credit ratings, and the company typically signs five-year agreements, which helps it borrow at lower costs. Among them, Meta (META.US) contributes $35 billion, and OpenAI contributes $22.4 billion. Customer concentration is also changing: Microsoft's (MSFT.US) share of contracted backlog was 66% at the end of 2024 but dropped to under 33% a year later.

CoreWeave Bonds in Distress

Nevertheless, Bank of America's upbeat outlook has not dispelled market worries about leveraged AI financing. On Thursday, CoreWeave bonds fell to junk debt levels, and U.S. chip makers collectively lost nearly $200 billion in market value since last week as AI financing activity slowed. The latest U.S. inflation data exceeded expectations, prompting investors to seek safety in U.S. Treasuries.

Many market participants see CoreWeave as a bellwether for funding pressure among highly leveraged tech companies. CFRA Research’s Chief Investment Strategist Sam Stovall noted that CoreWeave is a proxy indicator for other highly leveraged firms, with investors worried these tech companies might trigger a debt crisis. Interactive Brokers’ Chief Market Analyst Steve Sosnick pointed out that the market is questioning the speed, efficiency, and profitability of rapid AI-related construction; if data center buildout growth becomes more restrained, hardware manufacturers will see less spending, as customers will no longer compete to buy equipment at any cost.

David Morrison, Senior Market Analyst at Trade Nation, noted that given that AI infrastructure is burdened with huge debts, rising borrowing costs are far from ideal. The market fears these costs will erode future returns, and the timing and scale of those returns remain unclear; meanwhile, there are ongoing concerns about overbuilding capacity that may never be used.

Eastspring Investments portfolio manager Rong Ren Goh believes the sell-off reflects a cautious attitude by investors towards the more vulnerable segments of the AI ecosystem. As tech leaders advocate slowing the development of cutting-edge models, the market is increasingly questioning the sustainability and trajectory of compute demand. These concerns are further exacerbated by higher financing costs, raising the investment threshold for capital-intensive AI infrastructure projects.

However, Equisights Research CEO Parth Talsania believes this is a "rate event in credit disguise," ignited by higher-than-expected CPI data, with CoreWeave merely the most leveraged and longest-duration expression among them rather than being the first proof of AI demand starting to crack. He added that companies collecting cash are relatively insulated, with the risks concentrated among those borrowing to acquire assets whose residual values depend on chip cycles that are beyond their control.

eToro U.S. Investment Analyst Bret Kenwell stated that soaring bond yields have certainly unsettled investors, but this does not mean CoreWeave is inevitably headed for bankruptcy; it does, however, force investors to re-evaluate the business's economics and scrutinize its peers more closely.