CoreWeave (NASDAQ:CRWV) investors have more reasons to cheer. Hot on the heels of its expanded $6.5 billion deal with OpenAI, the AI infrastructure company has now inked another mega agreement – this time with Meta.
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Earlier this week, the AI infrastructure company announced a $14.2 billion amendment to its 2023 Master Service Agreement with Meta, establishing the social media giant as its second hyperscaler client alongside OpenAI. This deal significantly boosts CRWV’s backlog, now totaling $44.3 billion (not including NVIDIA’s $6.3 billion unused capacity agreement), with commitments stretching into the early 2030s and options for further extensions.
Stifel’s Ruben Roy – an analyst ranked amongst the top 1% on Wall Street – sees the contract as a “strategic win that diversifies CRWV’s customer base beyond MSFT and OpenAI, and enhances debt collateralization potential.”
The new, sizable contract with a leading hyperscaler further strengthens Roy’s view that demand for high-performance computing infrastructure will remain strong for at least the next five years, if not longer. Recent deals between Oracle and OpenAI, as well as NBIS and Microsoft, highlight the ongoing race among top AI developers to secure compute capacity.
The agreement also helps reduce CRWV’s reliance on its two largest customers – Microsoft, which represented roughly 71% of revenue in the second quarter, and OpenAI, which carries an estimated $22.4 billion backlog, including last week’s $6.5 billion addition. With Meta now tied to a specific contract value under the MSA, CRWV is also positioned to improve its ability to collateralize debt.
Still, Roy tempers his optimism with caution. The analyst highlights the “catch-22 introduced via the pending Core Scientific (CORZ) acquisition,” noting that the upcoming October 30 shareholder meeting represents a “crucial near-term catalyst.” While the deal could pressure CRWV’s valuation multiple in the short run, it also offers the potential for long-term upside by transitioning the company into direct infrastructure ownership.
The central debate among investors is whether the proposed ~$9 billion offer undervalues CORZ. Roy’s initial analysis suggests it does; however, if CORZ’s roughly 700MW of compute power (over 1GW of gross power) expansion is dependent on connectivity to CRWV’s leased sites, then some discount would be justified, and likely accepted by shareholders.
“We think the likelihood of this being the case could be higher than initially expected, given CRWV commentary about CORZ’s leadership support for the deal on last quarter’s earnings call,” Roy said on the matter.
That said, recent reports have also highlighted resistance from some major investors, such as Two Seas Capital, which holds about 6.2% of CORZ’s outstanding shares. So, while Roy would view a deal approval positively, he assigns CRWV shares a Hold (i.e., Neutral) rating until there is “further clarity on the company’s longer-term structure and positioning, which introduces volatility risk near-term.”
Roy’s rating is backed by a $120 price target, a figure that factors in a one-year decline of ~13%. (To watch Roy’s track record, click here)
The Street takes a slightly more constructive view. Based on a mix of 16 Buys, 10 Holds, and 2 Sells, the analyst consensus sits at Moderate Buy, with an average target of $147.50 – implying ~7% upside from current levels. (See CRWV stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.