Kerrisdale Capital has revealed a short position against CoreWeave Inc. CRWV, labeling the AI infrastructure firm a “debt fueled GPU rental business with no moat” and setting a price target that implies 90% downside from its current valuation.
Kerrisdale Pegs CRWV’s Stock Price At $10 Per Share
The short-selling firm calls CoreWeave the “poster child of the AI infrastructure bubble,” arguing its explosive growth is built on hype rather than sustainable innovation.
The report asserts that CoreWeave lacks any proprietary technology or defensible IP, making its services “interchangeable” with competitors. “CoreWeave fails the most basic finance test – it generates returns below its cost of capital, destroying rather than creating shareholder value,” the report states. Kerrisdale sees the company’s fair value near $10 per share.
See Also: Nvidia Deal Sends CoreWeave Stock Higher—Skeptics See 90% Downside
CRWV’s Reciprocal Back-Scratching With NVDA?
The activist report lands amid growing criticism of the company’s close ties with investor and partner Nvidia Corp. NVDA, which one AI pundit, Tony Nash, the CEO and Founder of AI strategy firm, Complete Intelligence, described as a potential “circle jerk of companies buying from each other at inflated prices to push up each other’s valuations”.
At the heart of the criticism is CoreWeave’s “unusually close partnership with Nvidia,” which serves simultaneously as an investor, its sole GPU supplier, and a major customer. This “round-trip arrangement” made Nvidia CoreWeave’s second-largest customer in 2023, accounting for 15% of total revenue.
CRWV At The Center To Extreme Customer Concentration
Kerrisdale highlights what it calls a “fragile financial model” reliant on expensive asset-backed debt with interest rates as high as 11-15%.
The firm projects CoreWeave will burn through $19 billion in cash in 2025 alone and faces dangerous exposure from extreme customer concentration, with Microsoft Corp. MSFT accounting for 70% of revenue.
According to Kerrisdale, major customers view CoreWeave as a “stopgap,” not a strategic partner. The report claims that to mask weak unit economics, CoreWeave presented an “illustrative” contract to analysts based on what a former engineer called “utopian” assumptions.
Price Action
CRWV rose 7.60% on Monday to $120.47 per share and slipped 0.05% in after-hours. The stock has advanced 201.18% since listing in March this year.
Benzinga’s Edge Stock Rankings indicate that CRWV maintains a weaker price trend in the short term but a stronger price trend in the medium and long terms. Additional performance details are available here.
The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, ended higher on Monday. The SPY was up 0.53% at $660.91, while the QQQ advanced 0.86% to $591.68, according to Benzinga Pro data.
On Tuesday, the futures of the Dow Jones, S&P 500, and Nasdaq 100 indices were higher.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga
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