Why CoreWeave's beaten-down stock could be due for a major comeback

By Christine Ji

CoreWeave shares have tumbled almost 40% from their May highs as debt fears spooked investors - but one analyst believes the selloff has been overblown

S&P bumped its outlook on CoreWeave's credit rating to "positive" in April, citing strong multiyear contracts.

One of the most controversial stocks within the artificial-intelligence trade has gained a new fan on Wall Street.

UBS analyst Karl Keirstead initiated coverage of CoreWeave shares (CRWV) late on Tuesday with a buy rating and a $120 price target, implying 40% upside relative to current levels. As a neocloud, or specialized cloud-computing company, CoreWeave provides customers ranging from Big Tech companies to new AI startups with access to Nvidia (NVDA) server racks and associated software and services.

"This is a non-consensus view," Keirstead wrote. Even as demand for AI processing power remains high, Wall Street has expressed caution about CoreWeave and specialized cloud providers at large. Rising interest rates and volatility in the AI infrastructure trade have led investors to shift into other areas of tech like software, leading shares of CoreWeave to fall nearly 40% since their peak in May of this year.

But Keirstead believes that it's "increasingly likely" that investors will rotate back into high-growth AI infrastructure names. If that happens, CoreWeave could be a major beneficiary as the most prominent neocloud company.

Critics of CoreWeave have pointed to the company's capital-intensive business model, which requires it to take on large amounts of debt to build new data centers. Analysts expect third-quarter interest expenses to consume roughly a quarter of revenue.

"The easier call, in light of persistent leverage concerns, would be to launch with a more neutral/cautious stance and wait. Yet in our view the Street may be under-appreciating the strength and durability of AI compute demand," Keirstead said, referring to computing power.

While the company's credit profile has put pressure on valuations, Keirstead flagged that CoreWeave continues to access new debt funding and is committed to working toward an investment-grade debt rating. S&P rates CoreWeave at a B+, meaning the company's debt is high-yield, but it revised its outlook to "positive" in April on increased revenue visibility from long-term commitments.

Investors wary of CoreWeave's leverage levels may be overlooking the safeguards built into the company's financing structures, Keirstead continued. CoreWeave's debt obligations are less risky by creditworthy Big Tech customers and leading AI labs. Major customers typically prepay 15% to 25% of the total contract value, which reduces CoreWeave's net borrowing needs.

Additionally, roughly 90% of CoreWeave's capital outlays are financed through delayed draw term loans secured directly by Nvidia hardware assets, creating a tangible collateral base for lenders.

"CoreWeave has established a reputation for reliability and performance that distinguishes it from peers," Keirstead added. The company's backlog of customer contracts grew 246% in the second quarter. UBS estimates full-year 2026 revenue will grow 154% to $13.05 billion before more than doubling to $28.4 billion in 2027.

As the price of AI computing power continues to rise, Keirstead believes CoreWeave could be well-positioned to benefit from a resurgence in positive AI infrastructure sentiment.

-Christine Ji

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09-23-26 0718ET