Why CoreWeave (NSDQ:CRWV) Investors Should Be Nervous Right Now.

The Cracks Are Starting to Show at CoreWeave.

CoreWeave (NSDQ:CRWV) has been one of the standout names in the AI data centre narrative, and the share price performance reflects that enthusiasm. However, at the current valuation, we think the stock risks becoming a value trap unless investors look much deeper into the underlying fundamentals. This is not a critique of the business model itself. CoreWeave is clearly executing operationally, with the latest quarter delivering US$1B in revenue, which is an impressive result by any standard. The issue is that this growth is coming alongside a US$110M quarterly loss, highlighting that scale has not yet translated into economic profitability.

In our view, two structural pressures matter most. First, the company is financing the bulk of its compute expansion through expensive debt, with a debt to equity ratio above 300%, which materially raises financial risk and makes future capital raising highly likely, given CoreWeave remains a cash burn business.

Second, heavy depreciation from ongoing semiconductor purchases is weighing on earnings, while extremely optimistic forward expectations are already embedded in the valuation. That combination can create what we see as a valuation illusion for shareholders, where headline growth masks balance sheet stress and muted near-term returns. The business is strong, but at this price, the margin for error feels uncomfortably thin.

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Leverage Is Catching Up With CoreWeave

CoreWeave has a market capitalisation of roughly US$52B, yet its enterprise value sits closer to US$73B due to net debt of around US$25B, which immediately highlights how leveraged the equity story has become. More concerning is that CoreWeave’s default insurance costs have risen to 7.9%, signalling that credit markets are beginning to price in a higher risk of financial stress. While a default is not the base case, it is clearly a risk that is becoming more visible. SEC filings show this is not a single loan issue, but a layered debt structure tied to GPU delayed draw facilities that expanded rapidly through 2024 and 2025.

In simple terms, as demand for CoreWeave’s services has grown, the company has leaned increasingly on debt to accelerate expansion. That strategy can work in a strong demand environment, but with a highly concentrated hyperscaler customer base, any softening in demand would leave the balance sheet doing much of the damage. The growth story remains compelling, but the rising leverage meaningfully raises the stakes for investors.

The Macro Doomsday case

In a true downside scenario where the macro environment deteriorates into recession and the US faces broader debt pressures, highly leveraged technology companies are unlikely to be early beneficiaries of central bank support. In that setting, a business like CoreWeave would be far more exposed during a prolonged high interest rate and high inflation period. If financial stress were to intensify, it is more plausible that an industry partner steps in rather than public markets, particularly given Nvidia already owns roughly 7% of CoreWeave. This is not a base case outcome, but it reinforces why investors should closely monitor the company’s debt profile and refinancing risk.

Is CoreWeave a value trap

The second risk is a potential value trap. CoreWeave’s equity value has fallen by roughly US$33B, with the share price down about 46%, which on the surface makes the stock appear inexpensive. On an EV to EBITDA basis of around 16.4x, against forecast EBITDA growth of 75% to 80%, the valuation screens as cheap.

However, this comparison can be misleading. CoreWeave’s growth is fundamentally constrained by physical capacity, unlike software businesses that can scale rapidly with minimal incremental cost. EBITDA is heavily influenced by capital-intensive GPU deployment, and margin assumptions rely on sustained hyperscaler demand and pricing power. Adding to this risk, semiconductor assets depreciate quickly, meaning ongoing capex is not just a growth choice but a structural requirement of the business model.

What we think about CRWV

Therefore, we believe the current consensus is leaning closer to a blue sky outcome in its future expectations. Given the structure of CoreWeave’s business model, the capital intensity of the semiconductor supply chain, and the underlying mechanics of AI infrastructure, investors should be more measured in their assumptions. These risks do not undermine the quality of the platform, but they do materially shape the risk reward profile, and in our view careful consideration before making an investment decision is needed.