Morningstar analyst Luke Yang expects cheaper GPU compute to expand CoreWeave’s total addressable market by enabling more organizations to train and fine-tune proprietary AI models.
- Yang said declining GPU costs could create “long-tail demand” from organizations looking to build or fine-tune proprietary AI models.
- He expects more use cases to emerge as GPU computing becomes cheaper, supporting the firm’s view that CoreWeave’s annual revenue can eventually exceed $100 billion.
- CoreWeave CEO Mike Intrator said AI cloud demand is expanding beyond frontier labs into software, industry, financial markets, enterprise workflows and national security.
CoreWeave Inc. (CRWV) could eventually scale annual revenue above $100 billion as falling GPU computing costs unlock new demand for artificial intelligence infrastructure, according to Morningstar.
Morningstar analyst Luke Yang expects cheaper GPU compute to expand CoreWeave’s total addressable market by enabling more organizations to train and fine-tune proprietary AI models.
Following CoreWeave’s second-quarter (Q2) results, Morningstar raised its fair value estimate to $115 from $106 on CoreWeave shares, implying an upside potential of about 28% from Tuesday’s closing price.
CoreWeave shares were up 18% in Wednesday’s pre-market trade. CRWV was among the top trending tickers on Stocktwits at the time of writing.
Cheaper AI Compute Could Unlock New Demand For CRWV, Says Yang
Yang said declining GPU costs could create “long-tail demand” from organizations looking to build or fine-tune proprietary AI models. While the high cost of proprietary model development currently limits adoption, lower compute prices could make those workloads more economical.
“As the cost of GPU computing continues to go down and enterprise AI demand sees exponential growth over the next few years, we think CoreWeave’s total addressable market can expand dramatically,” Yang said.
He added that proprietary models can offer companies greater control over model behavior, context awareness and security. Yang expects more use cases to emerge as GPU computing becomes cheaper, supporting the firm’s view that CoreWeave’s annual revenue can eventually exceed $100 billion.
CRWV’s Revenue Backlog Reaches $104B
CoreWeave’s revenue backlog grew 56% sequentially to $104 billion in Q2, excluding $25 billion added in the third quarter (Q3). The company’s active power capacity surpassed 1.5 gigawatts during the quarter, following the addition of 500 megawatts.
Morningstar highlighted CoreWeave’s growing exposure to software-driven services. Managed inference reached $100 million in annual recurring revenue only a few months after launch, which the firm said could support better margins over the long term.
CoreWeave’s adjusted operating margin was 5% in Q2, with the company expecting the figure to reach the low teens by year-end. Morningstar expects CoreWeave to eventually achieve adjusted operating margins above 20% around 2030.
CoreWeave reported a loss of $1.14 per share on revenue of $2.58 billion, while Wall Street expected a loss of $1.2 per share on revenue of $2.56 billion, according to Fiscal.ai data. The company forecast revenue in the range of $3.45 billion-$3.46 billion in Q3, beating an estimate of $3.42 billion.
CRWV CEO Says AI Demand Is Broadening Across Industries
CoreWeave CEO Mike Intrator said during a post-earnings call that demand for AI cloud infrastructure is expanding beyond frontier AI labs into software, industrial systems, financial markets, enterprise workflows and national security.
“AI is no longer confined to frontier model labs,” Intrator said, adding that the company is seeing demand broaden across sectors, geographies, workloads and generations of GPU architecture.
Intrator pointed to Caterpillar, Isomorphic Labs, Flow Traders, IMC and Leidos as examples of customers using CoreWeave for applications spanning physical AI, life sciences, quantitative trading and national security. He also said near-term capacity remains “effectively sold out,” while pricing and margins for Nvidia Corp.’s (NVDA) Blackwell and Vera Rubin GPUs are reaching new highs.
“Compute is no longer a one-time requirement concentrated at the beginning of a model’s life. It becomes an ongoing requirement that grows with every application in production and every cycle of improvement,” he said.
What Retail Investors Think Of CRWV Stock
Retail sentiment on Stocktwits around CoreWeave trended in the ‘extremely bullish’ territory, with message volumes at ‘extremely high’ levels at the time of writing.
CRWV stock is up 26% year-to-date, but down 35% over the past 12 months. The Invesco QQQ Trust (QQQ) is up 25% over the past 12 months, while the iShares U.S. Technology ETF (IYW) is up 37%.
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