CoreWeave CEO's Defense of AI Circular Deals Amid Persistent High Risks

What happened

CoreWeave, an AI cloud infrastructure provider, went public in March 2025 with a highly anticipated IPO that failed to meet hype. CEO Michael Intrator recently defended the company's AI circular deals as collaborative efforts, likely addressing scrutiny over business practices. This comes as filings reveal extreme customer concentration, with one client representing 67% of Q3 2025 revenue and a $55.6 billion backlog underpinned by mega-contracts. Despite rapid growth, CoreWeave is loss-making with high leverage, negative EPS, and interest coverage of only 0.15x, straining financial flexibility. The CEO's remarks aim to project stability but do not resolve underlying vulnerabilities in a capital-intensive, competitive market.

Implication

The CEO's comments highlight management's effort to manage perceptions but offer no new data to mitigate risks like customer concentration or high leverage. CoreWeave's dependence on a few customers, including OpenAI and Meta, exposes it to contract renewals and potential revenue volatility. With net debt/EBITDA at 19.3x and interest coverage of 0.15x, the balance sheet is stretched, limiting ability to weather downturns or refinance debt. Ongoing capex for GPU expansion consumes cash flow without assured returns, amid intense competition from hyperscalers. Until evidence of revenue diversification, improved profitability, or reduced leverage emerges, the stock's valuation remains disconnected from its precarious fundamentals.

Thesis delta

The CEO's defense of AI circular deals does not shift the investment thesis; CoreWeave's high-risk profile, marked by customer concentration and leverage, persists unchanged. Investors should continue to await concrete improvements in financial health and risk mitigation before reconsidering the 'WAIT' recommendation.