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CoreWeave stock tumbled Wednesday following its first earnings report since going public, as the data center company’s growing capital expenditure raised concerns among investors.
Shares in the Nvidia-backed (NVDA) company initially dropped more than 13% during after-hours trading, following the results before shares rebounded on Thursday morning.
CoreWeave is a so-called ‘picks and shovels’ company of the AI revolution. It’s one of the largest holders of Nvidia’s graphics processing units and leases data center capacity to Big Tech companies.
The firm’s executives said in a call following the report’s publication that it expects to spend between $20 billion and $23 billion in 2025. That tops the $18.3 billion projected by Wall Street analysts, according to Yahoo Finance, citing Bloomberg consensus estimates.
Analysts downgraded their outlook for CoreWeave stock following the news.
Gil Luria of DA Davidson downgraded the stock to an Underperform rating from Neutral on Thursday morning, citing the “level of capital intensity equity investors are unlikely to stomach.” Luria also pointed to CoreWeave’s soaring interest expenses for the decision. The company’s interest expenses rose 549% in the first quarter, totaling $264 million. That’s more than the $182 million projected by Wall Street, according to Yahoo Finance (APO), citing Bloomberg data.
Operating expenses have been soaring too. While CoreWeave announced a 420% revenue increase from the same period last year, it also unveiled a 487% jump in operating costs, totaling more than $1 billion for the first quarter of the year.
CoreWeave is not the first tech company to take an expensive gamble on AI-related infrastructure — and then be punished on Wall Street for it.
Leading the pack is Microsoft (MSFT), which plans to allocate $80 billion in capital expenditures for data center development in the 2025 fiscal year, it announced in a January blog post. Analysts forecast that such spending could create a drag on margins for several years.
Meanwhile, Amazon’s (AMZN) capital expenditures are expected to reach approximately $75 billion in 2025, up more than 50% from the previous year. Following that company call in February, its stock slipped more than 5% in after-hours trading.
Alphabet (GOOGL) also plans to spend $75 billion on capital expenditures in 2025, the majority of which to be directed to enhancing technical infrastructure for AI, it announced during a call with investors in February. Google’s stock fell more than 8% immediately after.
Likewise, Meta (META) has set its AI capital expenditure budget at $60 billion to $65 billion for 2025—a significant jump from previous years.