CoreWeave received two stock rating upgrades in one day. Is it too late to buy them?

Several analysts at the beginning of the week revised their estimates regarding the shares of cloud provider CoreWeave. Thus, Raymond James began coverage of the securities with a recommendation to buy, and Citizens raised their rating. The reason for this was the service's contract with Nvidia for $6.3 billion, under which the world leader in the market of AI-processors will buy all the unclaimed capacity of CoreWeave.

Analysts at Raymond James, led by Josh Beck, began coverage of cloud provider CoreWeave with an Outperform recommendation, which equates to a Buy recommendation, Seeking Alpha reports. Raymond James set a $130 target price on the stock, up 9.8% from the stock's closing price on Tuesday, September 16th.

Raymond James is optimistic about the prospects for "the laws of scaling" in relation to cloud service, according to which as computing resources grow, so will AI performance. Beck linked this to the "vector of increased reasoning and broader commercialization of inference": models are expected to become increasingly better at handling queries and the results they produce are expected to be used in real products.

Also in CoreWeave's favor is the fact that Wall Street's consensus forecasts for the capital expenditures of AI race leaders are significantly understated compared to Raymond James' calculations, the analysts wrote. They predict that the total capital expenditures of the six largest players in cloud AI - Amazon, Google, Meta, Microsoft, CoreWeave and Oracle - will grow to $900 billion by 2028, while market expectations are still at $550 billion.

Analysts believe CoreWeave can handle scaling the software platform, increasing power consumption, raising funding, and diversifying its customer base. All of this is needed to reach $20 billion in annual subscription revenue (ARR) by the end of 2027.

Citizens analysts led by Greg Miller upgraded CoreWeave securities from Neutral (Market Perform) to Outperform (Market Outperform) and set a target price of $180, up 52% from the closing price on Sept. 16.

Citizens attributes the increase to the acceleration of the GPU-as-a-Service (GPUaaS) market, a model for providing access to GPU capacity on a subscription or hourly rental basis through the cloud. According to Miller, the size of the addressable market in this segment is increasing dramatically. As examples, he cited Oracle's record $450 billion order and Microsoft's recent $17 billion contract with Nebius, which also falls into the GPUaaS category. He estimated that this market could grow from $3-4 billion today to $300 billion in the long run.

Citizens analysts add that most investors still don't fully understand CoreWeave's business model and its revenue sources, as well as the associated risks. Despite the stock's 30% drop after its second quarterly report and lower margin expectations for the second half of 2025, analysts believe that growing demand from hyperscalers can offset these risks in the short term.

CoreWeave shares rose nearly 8% on Monday, September 15, after the company announced a new $6.3 billion contract with Nvidia. Under the agreement, Nvidia will buy out CoreWeave's unused data center capacity through April 2032.

Analysts at Deutsche Bank on the same day said they may significantly revise upward their outlooks on CoreWeave shares and recommended buying the securities (Buy rating). "We see several positive factors that could lead to a significant uptick in revenue expectations and the amount of outstanding commitments on existing contracts in the next quarter or two," analyst Brad Zelnick wrote in a note cited by Seeking Alpha. - Investors are already showing a willingness to encourage this, despite the continued uncertainty in AI's long-term prospects." Zelnick said the company could benefit from new capacity coming online within 12 to 18 months.

According to Barclays, the updated agreement acts as an "insurance" for CoreWeave: it guarantees the use of computing resources regardless of the end customer, writes Reuters. Analysts of the investment bank also note that additional funding from Nvidia can be regarded as a useful diversification, allowing to reduce dependence on the largest customers.

"This is a positive signal for CoreWeave, given investor concerns about the company's ability to load up data centers outside its two key customers, Microsoft and OpenAI," Reuters quoted a Barclays note as saying.

In March, CoreWeave signed a five-year, $11.9 billion contract with OpenAI to provide cloud capacity to the ChatGPT developer. In addition, a separate agreement was signed that commits OpenAI to pay for up to $4 billion more in services through April 2029.

In August, CoreWeave reported a surge in demand for its cloud services in the second quarter amid rapid adoption of AI tools. At the same time, however, the company's operating expenses nearly quadrupled to $1.19 billion, underscoring the strain that rapid revenue growth is putting on its financial strength, Reuters notes.

This article was AI-translated and verified by a human editor