Stock Plunges but Still Gets Backing! BofA Maintains CoreWeave (CRWV.US) "Buy": Don't Be Scared Off by Financing Concerns, Backlog Still at Least $129 Billion

Title context: Stock Plunges but Still Gets Backing! BofA Maintains CoreWeave (CRWV.US) "Buy": Don't Be Scared Off by Financing Concerns, Backlog Still at Least $129 Billion Text: After AI infrastructure financing concerns triggered a roughly 18% cumulative decline in CoreWeave's stock price over two consecutive trading days, Bank of America Corp still reiterated its "Buy" rating on CoreWeave on Thursday and raised its revenue forecasts. Combined with a market rebound, CoreWeave rebounded nearly 6% on Thursday to $69.69. BofA analyst Tal Liani said in a report that the decline in CoreWeave's stock price likely reflects market concerns about financing obstacles for AI infrastructure participants. But BofA still kept its $140 price target unchanged. That target is based on 26 times CoreWeave's expected 2027 operating profit, above the 14x to 19x valuation range BofA uses for comparable cloud data center companies, due to CoreWeave's faster expected growth. BofA also broadly raised its financial forecasts: it expects CoreWeave revenue to grow 105% in 2027 and 63% in 2028, above its previous forecasts of 102% and 58%; corresponding to 2027 revenue of $26.5 billion and 2028 revenue of $43.3 billion, respectively above the previously estimated $26 billion and $41 billion; 2026 revenue is expected to be $12.9 billion. On the operational side, BofA expects CoreWeave to add 1.4 to 1.5 gigawatts of active power capacity each year over the next two years. As the company begins adopting NVIDIA Corporation's (NVDA.US) next-generation Vera Rubin chips, revenue per megawatt is expected to rise from about $10 million currently to about $14 million by the end of 2028. But expansion also means higher capital expenditures. BofA raised its CoreWeave spending forecasts for 2027 and 2028 to $47.4 billion and $49.8 billion, respectively, up from $43.8 billion and $44.7 billion. The bank estimates that CoreWeave's cash spending this year will exceed cash revenue by about $23.8 billion, and by about $24.8 billion in 2027; by the end of 2026, the company's debt will be about three times shareholders' equity. Part of BofA's optimistic view on CoreWeave comes from its contract backlog. CoreWeave's signed contract backlog is at least $129 billion, with most customers being large technology companies with strong credit ratings, and the company typically signs five-year agreements, which helps it borrow at lower cost. Among them, Meta (META.US) contributes $35 billion and OpenAI contributes $22.4 billion. Customer concentration is also changing: Microsoft Corporation (MSFT.US) accounted for 66% of the contract backlog at the end of 2024, and a year later it has fallen to less than 33%. CoreWeave Bonds in Distress Nevertheless, BofA's positive view has not dispelled market concerns about AI leveraged financing. On Thursday, CoreWeave bonds had fallen to distressed debt levels, U.S. chipmakers have lost nearly $2 trillion in market value cumulatively since last week, and AI financing activity has slowed. The latest U.S. inflation data came in above expectations, prompting investors to turn to U.S. Treasuries as a safe haven. Several market participants view CoreWeave as a bellwether for financing pressure on highly leveraged technology companies. Sam Stovall, chief investment strategist at CFRA Research, said CoreWeave is a proxy for other highly leveraged companies, and investors worry these highly leveraged tech firms could trigger a debt crisis. Steve Sosnick, chief market analyst at Interactive Brokers, noted that the market is questioning the speed, efficiency and profitability of the rapid AI buildout; if the pace of data center construction becomes more restrained, hardware makers will receive less spending, because customers are no longer racing to buy equipment and pay at any cost. David Morrison, senior market analyst at Trade Nation, noted that given that AI infrastructure is carrying enormous debt, rising borrowing costs are far from ideal. The market worries these costs will erode future returns, while the likely timing and scale of those returns remain unclear; at the same time, there are also concerns about overspending on capacity that may ultimately never be used. Rong Ren Goh, portfolio manager at Eastspring Investments, believes the selloff reflects investors' caution toward the more fragile parts of the AI ecosystem. As technology company leaders advocate slowing frontier model development, the market is increasingly questioning the sustainability and trajectory of computing demand. These concerns are exacerbated by higher financing costs, which in turn raise the investment threshold for capital-intensive AI infrastructure projects. However, Parth Talsania, chief executive officer of Equisights Research, believes this is a "rates event dressed in credit clothing," ignited by higher-than-expected CPI data, and CoreWeave is simply the most leveraged and longest-duration expression of it, not the first evidence that AI demand is beginning to crack. He added that companies that collect cash are relatively insulated, and the risk is concentrated in entities that borrow to buy assets whose residual value depends on a chip cycle they cannot control. Bret Kenwell, U.S. investment analyst at eToro, said the sharp rise in bond yields is undoubtedly unsettling for investors, but it does not mean CoreWeave is necessarily headed for bankruptcy; however, it forces investors to reassess the economics of the business and take a closer look at its peers.