CoreWeave Inc. (CRWV) shares surrendered most of an early 7% premarket rally on October 19, even after Goldman Sachs reportedly upgraded the AI-focused cloud provider while lowering its price target to $106. Elevated borrowing costs continued to weigh on investor sentiment, and the stock ended regular trading with only a fraction of its initial gain.
The pressure extended into the following week. CoreWeave dropped about 20% last week and slipped another 0.44% on Monday, as rising bond yields intensified doubts about its debt-funded expansion strategy. JPMorgan analysts led by Samik Chatterjee pushed back against those fears, writing in a note that the business model is sound and that debt concerns are overdone.
Contract economics and cash burn. JPMorgan estimates a typical five-year contract earns an unlevered internal rate of return in the mid-teens, above CoreWeave’s estimated blended cost of capital of 9% to 11%. In a conservative case, capital spending is about 51% of a contract’s value, with roughly 80% financed by asset-level debt. After debt repayment, CoreWeave could retain cash equal to about 16% of contract value, enough to cover roughly five years of data center obligations without renewal. Each gigawatt of operating capacity could generate $10 billion to $15 billion annually, but adding a gigawatt costs more than $35 billion upfront.
JPMorgan said the cash burn reflects the pace of capacity additions rather than unfavorable project economics, and CoreWeave may not fund growth from operations until 2030. The bank maintained an overweight rating with a $125 price target for the end of 2027, while cautioning that free cash flow is expected to stay negative until 2030.
Bank exposure. In a separate note, JPMorgan analysts led by Kian Abouhossein described bank exposure to CoreWeave as well managed and very well secured. Large US investment banks and Japan’s MUFG could have about $1 billion to $3 billion at stake, while most European and Asian banks have less than $500 million. Much of the exposure sits in delayed draw term loans held through special-purpose vehicles, with capital released as projects hit milestones. CoreWeave has about $24 billion in committed delayed draw term loans, $15 billion drawn and $9 billion undrawn, and total debt of about $50 billion. Last week the yield on its notes due 2031 touched almost 16%, and the cost of insuring its debt rose to around 1,000 basis points.
A Gartner forecast added to the negative tone by questioning whether AI revenue will be enough to support healthy returns on massive infrastructure spending. Still, JPMorgan argued that the gap between upfront spending and revenue is the key risk for banks, while maintaining that contract-level returns remain healthy.
