CoreWeave Faces Class Action Over Alleged Infrastructure Misrepresentations, Amplifying Existing Risks

What happened

Hagens Berman has alerted investors to a pending class action against CoreWeave, alleging the company misled the market about data center delays and concealed infrastructure risks, undermining its ability to scale AI infrastructure and meet revenue guidance. This lawsuit directly echoes concerns from the DeepValue master report, which flagged third-party data center delays in Q3 2025 as a headwind to revenue conversion and backlog execution. CoreWeave's aggressive, debt-funded build-out has left it with extreme leverage—net debt to EBITDA of 19.3x and interest coverage of 0.16x—making it vulnerable to any operational missteps. The report already identified high customer concentration, with Microsoft accounting for ~70% of revenue, and noted that delivery issues could trigger contract downsizing or termination. The class action now formalizes these risks into legal liabilities, potentially eroding investor trust and exacerbating financial strain in an already precarious balance sheet.

Implication

The class action lawsuit crystallizes DeepValue's warnings, confirming that data center delays and infrastructure weaknesses are not just operational hiccups but material risks that could breach contracts and revenue targets. CoreWeave's heavy reliance on high-cost debt, with interest expense already exceeding operating income, leaves no margin for error if legal proceedings or reputational damage impair customer relationships or capital access. Given the company's concentrated revenue base—where a single customer drives ~70% of sales—any service delivery failures could prompt key clients like Microsoft to reallocate workloads, further pressuring utilization and margins. Legal costs and potential settlements may drain scarce cash flow, increasing the likelihood of covenant breaches or dilutive equity raises in a market already skeptical of its 140x EV/EBITDA valuation. Consequently, the risk-reward skew remains unfavorable, advising investors to trim positions or await evidence of operational catch-up and de-risking before considering new exposure.

Thesis delta

The lawsuit does not alter the fundamental thesis but intensifies it by adding legal and reputational overhangs that could accelerate downside scenarios. It shifts the narrative from speculative execution risks to tangible legal liabilities, increasing the probability of revenue misses or contract terminations that were previously flagged as thesis breakers.